Income protection provides you with a replacement regular income when you are unable to work due to illness or injury. It can give you peace of mind during a trying time by knowing that you and your family will be financially stable while you are out of work.
Is income protection insurance the same as sick pay?
Sick pay is provided by your employers for a specified period of time only (usually between 2 and 6 months). After this period, you will receive no pay from your employer whereas income protection cover will provide you with an alternative, regular income until you are deemed medically fit to return to work or until your policy reaches its intended duration (usually at age 55 to 65).
What about the state illness benefit?
Relying solely on the state benefit will leave you with a lot less income. Income protection plans can provide you with up to 75% of your regular income up to an agreed age less the state benefit while the state benefit alone will only – pay you for a maximum duration of 2 years if you have paid at least 260 weeks of social security contributions since starting to work, or – pay you for a maximum period of 1 year if your social security contributions paid are between 104 and 259 weeks.
The most you can be paid with this benefit is €203 a week and it is not available to those who are self-employed.
Which incidents and illnesses are covered by income protection insurance?
A comprehensive Income Insurance plan pays out if you are unable to work due to any sickness, accident or disability. The plan’s limitations lie within deferred periods, pre-existing conditions, age limits and the duration for which you set the policy.
How does income protection work?
Income protection is sometimes referred to as permanent health insurance but it is not the same as private health insurance. You need to be in full time employment to apply for this type of policy and it is available for self-employed people.
You can receive your income protection benefit after you have been unable to work at your job for an agreed period of time. This period is called ‘the deferred period’. You choose the length of the deferred period that suits you best when you take out the policy. A typical deferral period ranges between 4, 13, 26 or 52 weeks
If you choose a deferred period of four weeks you must be unable to work for at least four weeks before your income protection payments will start. The shorter your deferred period is the more your income protection policy will cost.
How much does income protection cost?
The cost of this insurance policy depends on a whole range of factors. The main influences on cost are:
- The level of cover you choose – what percentage of your income you want to cover (up to 75%)
- Your agreed deferred period
- The policy terms and conditions
Other factors that affect costs include your age, health status, family medical history, lifestyle, hobbies and the type of job you’re in. Some jobs carry higher risks of occupational hazards and injuries that could put you at a higher risk of being unable to work. Other exclusions or costing factors can apply depending on your personal situation.
“Even employees with good digital literacy are more likely to let their guard down in these anxious times, and fraudsters have been quick to exploit this vulnerability,” he says.
Do you pay tax on income protection?
Income protection is taxable when you make a claim but you are entitled to tax relief on your monthly premiums. The insurer will provide you with a statement that goes with your tax returns to claim tax relief.
Do I need income protection?
You may need income protection if you:
- Are self-employed and would have no alternative source of income
- Have little or no sick pay from your employer
- Have no ill-health pension protection
- Have dependants to provide for
- Have no other source of income
- Do not have sufficient benefits to replace your lost income and/or cover your expenses
Income protection insurance quote
At Clear Insurance Ireland, we offer a range of life and pensions insurance policies including income protection. We also provide family/personal protection, mortgage protection and specified illness cover. Contact our team to know more about our income protection plans and get a comprehensive quote today.
