Income Protection

Income protection used to be known as PHI, Permanent Health Insurance or Income Continuance. An income protection plan is designed to pay out a regular income to someone if they are unable to work due to an illness, accident, injury or disability.

This is very different cover to serious illness cover in that it will pay out a regular income, not just a one-off lump sum; you can make multiple claims on this policy, but just one on a serious illness plan, income protection will pay out if you suffer from ANY accident, illness, injury or disability that prevents you from doing your own job, whilst serious illness will just cover a very specific list of illnesses. Finally, income protection premiums qualify for tax relief at the marginal rate (up to 40%).

An income protection plan will pay a maximum benefit of 75% of your gross annual income up to age 65, until you return to work or until you die, whichever happens first.  With people continuing to work to a later age, cover is now also available up to age 70.

Why would I need it?
There is no obligation on employers in Ireland to pay staff if they are unable to work due to an illness. State benefit is currently just €203 per week and is payable for 2 years only with effect from January 1st 2010.  Payment of State disability benefit may also be subject to means testing.

If you are self-employed, you get nothing.

An income protection plan is essential

Quite simply, your ability to earn an income is your most important asset. It pays for absolutely everything – your mortgage, household bills, children’s school fees, entertainment, life assurance premiums, pension contributions etc. Add up how much your regular bills are every month – if the total is less than €879 per month and if all bills will stop after 2 years, then you could survive financially without an income protection plan.

Pricing
An income protection plan is not the type of policy you should pick based on price alone, as you can sometimes get what you pay for. That doesn’t mean however, it is going to be very expensive. You decide how much you are prepared to pay every month and a policy can be tailored to meet with your needs and match your budget. Premiums qualify for tax relief at the marginal rate, which makes it a very affordable policy. Factors that determine price are your age, occupation, sex, how much cover you are looking for and for how long.

As a HSE employee, you will receive full sick pay benefits for the first 3 months of your illness and 50% of your usual salary for the second 3 months – After that, you are on your own.   Your plan can be tailored to compliment any benefits you receive from your employer.

Not everyone can get an income protection plan. Those that can…should.