How job title affects income protection premium? - Financial life

How job title affects income protection premium?

What is your most important asset? Well, most of us can’t boast of a Da Vinci painting hung in the living room or a Bugatti in the garage. It is our daily job that sustains us and it’s a no-brainer to call that our most important asset.

Income protection talk sometimes feels like unravelling spaghetti! So many jargons like deferred period, indexation, benefit level or increasing in payment, etc make the talk go blah blah blah. Please read on the competition and consumer protection commission’s page on income protection (read here). It is a government agency so it has to be more credible.

Occupational Risk

My subject is simple. Why do you have to pay differently for income protection cover based on your occupational class (job type)? The Answer is a four-letter word: RISK.

A zoologist is a Class 1 job, where he/she will get the best-priced premium for their age. A zookeeper is class 3, where the premium is comparatively dearer.  Why? You know why- a zookeeper is more risk-prone than a zoologist. Shall we agree on this?

How Tax Relief can help

Even when we all agree there is a disparity in price based on occupation, a  silver lining is in the tax relief. Any premium paid towards an income protection cover in Ireland is eligible for tax relief at your marginal tax rate. That means it is either 20% tax relief or 40% tax relief. I tell my clients that It makes more sense for higher-rate taxpayers to protect their income and at the same time make their taxes efficient.

Why People do what they do?

You might think people in lower-risk occupations would naturally protect income with an income protection policy due to the price advantage. Let me throw a surprise at you. As a financial advisor, I have arranged hundreds of income protection policies in the last few years. My clients are mostly nurses and physiotherapists. To be honest they pay a hefty premium in comparison to an  IT programmer or an office manager( class 1 jobs). The only reason  I can apply for this behavior is that the frontline health workers see more of the devastating effects of an illness or a disability. They also get to see the financial impact on the family when a breadwinner falls sick.

As a reader, if you have any questions, pop me an email. I check my phone every 2 minutes ( no kidding). Getting in touch is easy. Email: joseph@financiallife.ie or click the link below https://financiallife.ie/management/joseph-ritesh.