Income Protection…is it necessary?
/If you were unable to return to work long-term due to an illness or from the after-effects of an illness, would it be possible for you to sustain your current standard of living? How long will your employer pay your salary if you are unable to work for an extended period?
What is Income / Salary Protection? Income Protection is different to serious illness cover and is designed to provide people with income replacement in the event of serious illness or if they are unable to work for a prolonged period of time. It can also be called Permanent Health Insurance (PHI).
Who is it for? It is particularly important for those who are self-employed or people who are not entitled to a salary while off work due to a medium to long term illness or disability.
Why would I need it? If you had an ATM in your house which held more than €500,000 in cash that you could access monthly for your day-to-day expenses, would you insure it?
We do not always think about income and future earnings as an asset. It funds our lifestyle, mortgage/rent bills, children’s education, life in retirement etc. In turn we also do not realise that as one of our biggest assets, this needs to be protected or insured. We don’t hesitate to insure our cars, houses, pets but we rarely think to insure the one thing that pays for these items…our income.
Pros: It can cover up to 75% of your income, tax relief is available on premiums paid subject to specified limits.
Cons: Depending on age, occupation and medical history, the premium can be costly, but the tax relief can bring the cost down.
Executive Income Protection can be set up by an employer who wants to provide income security for key employees or directors. The cost of pension contributions can also be covered under this plan. One benefit for employers or business owners is that the premiums qualify as allowable business expenses so they can be offset against corporation tax.
Personal Income Protection is similar to Executive Income Protection and can be set up by individuals who pay the premium themselves and claim the appropriate tax relief personally.
Wage Protector is more budget-friendly and most suitable for more manual occupations or for workers in riskier jobs which may be more expensive to insure.
