What is an Income Protection Deferred Period?

What is an Income Protection Deferred Period?

When looking at income protection insurance, you'll encounter the term "deferred period." Understanding it can save you money on premiums whilst ensuring you're covered when you need it. Let's break down what it means and how to choose the right one.

What Is a Deferred Period?

A deferred period is the waiting time between when you stop working due to illness or injury and when your income protection policy starts paying you.

Think of it like an excess on car insurance, except instead of money, it's time. You're saying "I can manage financially for X weeks, but after that, I need the insurance to kick in."

If you choose a 13-week deferred period and you're signed off work due to injury, you won't receive payments for the first 13 weeks. After that—if you're still unable to work—your monthly payments begin and continue until you return to work or your policy ends.

What Deferred Period Options Are Available?

Irish insurers typically offer five standard options:

• 4 weeks - Payments start after one month
• 8 weeks - Two months before cover begins
• 13 weeks - Three months, aligning with many employer sick pay schemes
• 26 weeks - Six months waiting period
• 52 weeks - A full year before payout

Not every insurer offers all options. Irish Life starts at 13 weeks, while Aviva, Zurich, and Royal London offer the full 4-52 week range.

How Does the Deferred Period Affect Your Premium?

The longer your deferred period, the lower your premium.

This makes sense—the insurer's risk is higher if they start paying after 4 weeks versus waiting a year. A minor illness might keep you off work for two months, but you're less likely to still be unable to work after 12 months.

The premium difference can be substantial. Someone choosing a 4-week deferred period might pay almost double compared to a 13-week period. This is one of the most effective ways to make income protection more affordable without reducing your cover amount.

How to Choose the Right Deferred Period

The key is understanding your complete financial safety net. Here's a practical approach:

Step 1: Check Your Employer Sick Pay

Find out how long your employer pays you if you're unable to work. Check your employment contract or ask HR. Some employers offer 6 months full pay plus 6 months half pay. Others provide only a few weeks. Self-employed individuals have no employer sick pay at all.

Step 2: Assess All Your Financial Resources

How long could you manage without your income protection paying out? Consider:

Savings and Emergency Funds - Could these cover essentials for 3-6 months?

Second Household Income - If your partner works, could their income alone cover household expenses? Many couples can manage on one income for extended periods, allowing for a longer deferred period and lower premiums.

State Disability Benefits - PAYE workers can claim State Illness Benefit (€232 weekly). Whilst modest, this provides some income during the deferred period.

Other Income Sources - Rental income, investments, or passive income streams extend how long you can wait before needing your policy to pay out.

Step 3: Match Your Deferred Period to Your Complete Safety Net

Your income protection should begin when all other resources would run out.

Employer sick pay with minimal resources: 13-week deferred period aligns with 13 weeks sick pay.

Self-employed with savings: 8-week period if savings cover 2 months.

Partner's income covers household costs: 26 or 52-week period significantly reduces premiums whilst maintaining long-term protection.

Rental income plus savings: Longer deferred period makes financial sense.

Be realistic about your actual resources, not optimistic hopes.

Avoiding Gaps in Coverage

The worst scenario is having a gap between when sick pay ends and income protection begins. If your employer pays for 4 weeks but you chose an 8-week deferred period, you'll have a month with no income.

Equally, avoid unnecessary overlap. If your employer pays for 6 months, a 4-week deferred period means paying higher premiums for duplicate coverage.

What Happens During the Deferred Period?

You're still covered during the deferred period—the policy just isn't paying out yet. You don't need to reapply once it ends.

If you're hospitalised for 7+ consecutive days during the deferred period, some policies include a hospitalisation benefit that pays immediately. If you return to work before the period ends, you simply don't claim. But if you become unable to work again due to the same condition within 6-12 months, most insurers won't make you wait through another full deferred period.

Special Considerations for the Self-Employed

Self-employed individuals have no employer sick pay and aren't eligible for State Illness Benefit (available to PAYE workers).

Shorter deferred periods often make sense, particularly with limited savings or if your household depends entirely on your income. Many self-employed professionals opt for 4 or 8-week periods.

However, if your spouse's income covers household costs or you have substantial savings, you can still benefit from longer deferred periods and reduced premiums.

Tax relief (20% or 40% at your marginal rate) helps offset costs. For more on tax benefits, see our guide to life insurance and tax relief.

Can You Change Your Deferred Period Later?

Generally, no. Your deferred period is set when you take out the policy and remains fixed. This is why choosing carefully from the start is important.

If your circumstances change significantly—like a new job with different sick pay—you could take out a new policy with a different deferred period. Your broker can advise whether this makes financial sense.

Using the Income Protection Calculator

Our income protection calculator helps ensure you're using appropriate inputs for your quote. It doesn't prescriptively tell you how much cover you need—instead, it guides you through key variables (income, occupation, age, deferred period) to ensure the quote suits your circumstances.

This is particularly helpful when deciding on your deferred period, as the calculator shows how different waiting periods affect your potential premium.

The Bottom Line

Your deferred period affects both premiums and protection. The right choice balances affordability with security, ensuring you're covered when all other resources run out.

Understand your sick pay policy, assess your complete financial safety net (partner income, State benefits, savings, other income), and use our calculator to model scenarios. Choose a deferred period matching your financial reality.

Income protection exists for medium to long-term illness—the average Irish claim lasts over 6 years. That's why getting your deferred period right matters.

Ready to explore your options? We'll help you determine the right deferred period and find the best income protection policy for your needs. Get a free quote or call 01 539 44 50.

Northstar Financial Planning Limited trading as QuoteLeader is regulated by the Central Bank of Ireland, registration number 190060.