What is income protection?
Income protection provides cover for periods of long absence from work due to accident or illness. Income protection pays a taxable income benefit if you are unable to work. The monthly cost of the policy gives you tax relief at your marginal rate.
The key question with this cover is when should the benefit start paying out? The “deferred period” is usually 13 weeks. This means you must be off work for more than 13 weeks before the insurance kicks in. After that time you are covered up to retirement should your illness or disability last that long.
If your job covers your income for long periods, or if you have a significant financial resource to support you, you could take a longer deferred period, which would reduce the cost of the cover. Alternatively you might seek a shorter deferred period, which is available for certain occupations.
Some occupations will not be eligible for cover while others will attract higher premiums. You should discuss the nature of your job, particularly any risk factors associated with it, so we can give you a clear idea of the cost and availability of cover.
What are the benefits of Income Protection?
- You can insure up to 75{fc543937f54af71650dcf9a3c22044cd1eaf894a8640ae215d3630201d2cc4ba} of your income less any entitlements to social welfare
- Income protection pays a taxable income benefit if you are unable to work
- The monthly cost of the policy gives you tax relief at your marginal rate
- You can take a long ‘deferred’ period which would reduce the cost of cover
- You can seek a short ‘deferred’ period, which is available for certain occupations
- Available (and essential) for Self-employed people and propriety company directors
- Income Protection is very flexible – for example it will typically cover you if you are out of work with depression, which would not be the case with serious illness cover
Remember – as with death in service, your employer may offer you an income protection type policy, so check first. Kirwan Financial Management can help you every step of the way.