When we consider taking any insurance, it is usually to protect something valuable to us, for example, our home, car, item of jewelry, etc. But what about our income? After all, it pays for everything!Some questions to help you decide if you need Income Protection Insurance:
How valuable is your income to you and your family?
How would you and your dependents cope financially if you were to suffer an injury or illness and were unable to earn an income?
Would social welfare entitlements be enough to cover your monthly expenses in the event you are unable to earn an income for a longer period?
The premium pays you a regular taxable income up to a maximum of 75% of your earned income. This ensures you can continue to meet the financial commitments you have.
Premiums qualify for tax relief of 20% or 40% depending on your marginal tax rate. It makes premiums more affordable, but remember the claim will be taxable.
Below are a few things everyone should know while choosing an income protection cover in Ireland:
An applicant in their 40's pays a relatively higher premium than a person in his/her 30’s. Income Protection has higher medical standards of entry hence medical history plays a significant part in acceptance of the policy.
Guaranteed premiums – the amount you pay doesn’t change as long as your benefits stay the same. • Reviewable premiums – your premiums stay the same for the first five years of your plan. Insurance company review your premium on the fifth anniversary and could increase it, reduce it or keep it the same.
You can cover up to 75% of your earnings (excluding Benefit In Kinds) less State Illness Benefit( for PAYE employees). For Self Employed applicants there is no need to reduce the state illness benefit.
There is an initial waiting period – we call it the deferred period – at the start of your claim. This is how long it will be before the insurance company starts paying your income. You can choose how long this is: 1, 2, 3, 6 or 12 months (4, 8, 13, 26 or 52 weeks).
Users can choose either guaranteed premium option or reviewable rates. The latter may be less expensive initially, but will become more expensive over time. Our inhouse recommendation is for Guaranteed premium. Smoker status makes the income protection plan more expensive. For ex smokers, insurance companies in Ireland ask for a confirmation of minimum 12 months non smoker status.
With a wide range of income protection providers in Ireland, choosing the one that meets your criteria can be tricky.. We suggest you consider the following factors before taking a decision:
We could help you get quotes from various providers, review them, and recommend the best income protection policy that offers the best coverage.
Always review the small print to understand conditions of the coverage, possible exclusions, and exactly what is covered.
Understand the coverage requirement before choosing a policy. How you can maintain your current living standards if you get sick, and at what level must be considered while determining the term and coverage.
A reliable financial advisor would understand your needs and analyse the available options before choosing the best insurer for you.
Guaranteed insurability option under an Income protection plan allows policy holders to increase the plan benefit every three years, to reflect their change in income/salary.
It’s recommended that you pay the premiums as per the contract and ensure the cover remains up to date.
Some insurers allow policyholders to increase your income benefit by 20% of your original amount without giving them new evidence of your health. They offer you this every three years subject to some terms.
You won’t pay any premiums while the insurance company is paying you an income, but your plan will carry on as normal. This means if you return to work and need to claim again, you can.
If the insurer is hospitalised for more than a certain number of days and is unable to work, the plan will pay a portion of the annual benefit for every night subject to certain limits.
Your plan will continue if you change jobs, regardless of what you’ll be doing in your new job.
Income protection coverage offers additional support to policyholders when returning to work after being unemployed for an extended period, such as 12 months or more.
Is Income Protection Suitable for All People?
Our expert team of advisers can guide you in selecting plans that suit your needs.
Some occupations are automatically declined for income protection like high-risk jobs like Airline pilots, Members of defense forces, Train drivers, etc. We can guide you with alternate options in such a scenario.
In some circumstances, premiums could be prohibitory due to factors like age, smoker status, occupational class, and health situation. Our advisors will lay out all the details and also suggest alternate options in such cases.
With our expertise and knowledge in the medical underwriting process, we know which provider is more sympathetic, especially if you have a medical condition.
At What Age Should I Get Income Protection Insurance in Ireland?
The earlier the better, is our norm.
Getting an income protection plan in the late 20’s and early 30’s makes the premium cost pretty affordable. People are usually much healthier at this stage, and medical exclusions in the policy are rare.
It may look like a younger person taking a policy will be paying the premiums for a longer duration. The comparison of actual cost with tax relief, indeed shows the the total cost of the plan is nearly the same or cheaper for a mid-20s individual when compared with a person entering the plan in mid 40s. Hence there is no actual monetary benefit in prolonging that decision to have income protection! In reality, the risks of not qualifying for a plan are greater in later life.
How does Income Protection Relate to My Profession?
According to the risk of injury or illness at work, insurers categorise you into different occupational classes.
For instance, a plumber is a class 4 (higher risk), whereas an accountant is a class 1 (lowest risk). The risk factor affects the cost of your premium too.
Most insurers also publish a Class 5 or Class D(Decline) occupational class. Jobs coming under this area are automatically declined for income protection. Some occupations like, Member of Defence forces, Fireman, Boxer, Garda, Bus Driver come under this category. However, don’t feel let down if you are in a declined class. We can discuss alternate protection options for you.
How Helpful is Income Protection?
Your greatest asset is your income unless you are a millionaire already.
With your monthly salary, you cover your bills, living expenses, your mortgage/rent, and everything else. Imagine living off social welfare alone? An income protection plan helps you maintain your lifestyle by giving you a monthly income if illness or injury prevents you from going to work. This plan takes away the financial burden, so you can concentrate on getting better.
At Financial Life, our expert Financial Planners help you choose the plan that suits your budget. We strongly believe that an income protection plan should form a foundation for any financial planning.
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