What Is Income Protection Insurance Ireland? 2026 Guide

What Is Income Protection Insurance in Ireland? (2026 Guide)

Excerpt: What is income protection insurance and how does it work in Ireland? This comprehensive 2026 guide explains what income protection covers, how it differs from other policies, who needs it, and what to consider when choosing cover. Learn about waiting periods, benefit periods, tax relief, and how to protect your income if illness or injury stops you working.

Wondering what income protection insurance actually is? It's one of those financial products that sounds important but can seem confusing. Let's break down exactly what income protection insurance is, how it works in Ireland, and whether you need it.

What Is Income Protection Insurance?

Income protection insurance pays you a regular monthly income if you can't work due to illness or injury. It's essentially a safety net for your salary—if you become unable to work, the policy replaces a portion of your lost income until you can return to work or until the policy term ends.

Think of it as sick pay that lasts far longer than what your employer provides. While most employers offer a few weeks or months of sick pay, income protection can continue for years or even until retirement age.

How Does Income Protection Work?

When you take out income protection, you choose how much monthly income you want to protect (typically 50-75% of your gross salary) and how long you want cover to last. If you become unable to work, after a waiting period—called the deferred period—the insurer starts paying you a monthly benefit.

The deferred period ranges from 4 to 52 weeks. The longer you wait, the lower your premium. Many people choose a period that matches when their employer's sick pay runs out.

The benefit period is how long the insurer will pay you—from 1-5 years, or until your selected retirement age (typically between 55-70). Longer periods cost more but provide greater security.

What Does Income Protection Cover?

Income protection covers inability to work due to illness or injury, including physical conditions like back problems, cancer, heart disease, or accidents. Crucially, it also covers mental health conditions like depression, anxiety, and stress—important since mental health is now a leading cause of long-term work absence in Ireland.

Most policies use an "own occupation" definition (you're covered if you can't do your specific job) or "any occupation" (only covered if you can't do any suitable job). Own occupation cover is more comprehensive but costs more.

What Doesn't Income Protection Cover?

Income protection doesn't cover unemployment or redundancy—only inability to work due to health reasons. Pre-existing medical conditions typically aren't covered unless disclosed and accepted. Policies usually exclude self-inflicted injuries, injuries from criminal activity, or conditions related to alcohol or drug abuse.

How Is It Different from Other Insurance?

vs. Serious illness cover: Serious illness pays a lump sum for specific conditions. Income protection pays monthly income for any illness or injury stopping work.

vs. Life insurance: Life insurance pays when you die. Income protection pays while you're alive but unable to work.

In Ireland, income protection is sometimes called "permanent health insurance" (PHI) or disability cover—these are the same thing.

Who Needs Income Protection?

If you depend on your salary, you need income protection—especially if you're self-employed, the main earner, have a mortgage or dependents, or your employer offers limited sick pay. Most emergency funds run dry within months of being unable to work.

Tax Relief on Income Protection

Premiums qualify for tax relief at your marginal rate. If you pay 40% tax, you effectively get 40% back through reduced tax. However, benefits received are taxable as income (income tax and USC, but not PRSI).

How Much Income Can You Insure?

Irish insurers typically allow up to 75% of gross income, though 50-60% is more common. Benefits are taxable, so your net benefit will be lower after tax.

Income Protection for Self-Employed

Self-employed people should strongly consider income protection since there's no employer sick pay. Insurers typically require accounts or tax returns to prove income. The tax relief is particularly valuable at higher tax rates.

Portable Cover When Changing Jobs

Most policies stay with you if you change jobs. However, moving to a higher-risk occupation might mean adjusted terms. Always notify your insurer about job changes.

Common Mistakes to Avoid

Choosing too long a deferred period: Ensure you can actually afford to wait. Three months of savings with a 52-week deferred period leaves a serious gap.

Not disclosing medical history: Non-disclosure can invalidate your entire claim, even for unrelated conditions.

Assuming you won't need it: One in five people will be unable to work for at least six months before age 65.

Only insuring net income: Benefits are taxable, so the after-tax benefit will be lower than you think.

Questions to Ask When Comparing Policies

What's the definition of inability to work—own occupation or any occupation?
How long is the deferred period?
What's the benefit period?
Are mental health conditions covered?
Can I increase cover later without medical underwriting?

The Bottom Line

Income protection insurance in Ireland provides monthly income if illness or injury stops you working. It covers a wide range of conditions including mental health, offers valuable tax relief on premiums, and can pay benefits for years or until retirement.

Secure this cover while you're healthy and working. Once you're ill or injured, it's too late. For most working people in Ireland, it's one of the most important types of insurance—protecting your ability to earn protects everything else.