Income Protection

Income Protection2021-03-02T10:50:21+00:00

What is Income Protection?

Income Protection is an often-misunderstood form of protection cover. It is arguably the most important form of cover given its long-term nature and the fact that’s designed to maintain lifestyle by way of regular payments. This cover therefore allows you to continue to meet, for example, lifestyle expenses, college fees, medical costs, holiday and even pension contributions. Where you have a one income household, this cover can often be extremely important to the long-term financial security of a family.

What Illness Protection covers?2019-09-16T17:45:00+00:00

This cover, therefore, allows you to continue to meet, for example, lifestyle expenses, college fees, medical costs, holiday and even pension contributions. Where you have a one-income household, this cover can often be extremely important to the long-term financial security of a family.

You can cover up to a maximum of 75% of salary less the state disability benefit where you are entitled to it. For underwriting purposes, occupations fall within certain classes depending on their perceived ‘riskiness’. When setting up a plan you must also choose a ‘deferred period’, this is the number of weeks which must lapse before a claim payment is made.   Policies with a longer deferred period will have a lower cost and for those in employment with a sick-pay arrangement, this can help reduce cost.

What are Income Protection Premiums?2019-09-16T17:45:17+00:00

Income Protection premiums are given full income tax relief by Revenue which tells us that the govt see this as a benefit worth encouraging. You will receive full relief at either 20% or 40% depending on your highest rate. We can help you arrange for this relief to be claimed.

For example, where a policy has a premium of say, €50 per month with the policyholder being on the higher rate of income tax of 40%, the net cost of the policy is reduced to €30 per month.

How Does Income Protection Work?2019-09-19T12:09:42+00:00

An Income Protection plan is designed to pay a specified percentage of your income where you have been deemed unable to work due to accident or illness. Where a claim is paid, it will continue to pay wither until you return to work or until you reach the retirement age noted in your policy. You can cover up to a maximum of 75% of salary less the state disability benefit where you are entitled to it. For underwriting purposes, occupations fall within certain classes depending on their perceived ‘riskiness’.

When setting up a plan you must also choose a ‘deferred period’, this is the number of weeks which must lapse before a claim payment is made. Policies with a longer deferred period will have a lower cost and for those in employment with a sick-pay arrangement, this can help reduce cost.

Income Protection premiums are given full income tax relief by Revenue which tells us that the govt see this as a benefit worth encouraging. You will receive full relief at either 20% or 40% depending on your highest rate. We can help you arrange for this relief to be claimed. For example, where a policy has a premium of say, €50 per month with the policyholder being on the higher rate of income tax of 40%, the net cost of the policy is reduced to €30 per month. Executive Income Protection For those who are company directors, senior management, or in a position to have their Income Protection paid via a company, the premiums can be paid without an income tax, PRSI or USC being applied to give further tax advantages. If this applies to you, give me a call on the number below to discuss in more detail.

These are the essentials, but as I always say, you should not go ahead with any policy until speaking with an advisor to ensure it fits your requirements exactly. Income Protection, in particular, is a complex area so please feel free to give me a call on 01 539 44 50  for a quick chat. Ken.

QuoteLeader is a trading name of Northstar Financial Planning Ltd and is regulated by the Central Bank of Ireland and is registered in Ireland under company number 635508. Registered office : The Diamond, Carndonagh, Co.Donegal.