How much does an income protection plan cost?

December 5, 2011

This depends on a number of factors, including your age, gender, occupation, whether you smoke or not and what level of benefit you are looking to insure and how quickly you would like to receive it.

An individual can cover a maximum of 75% of your gross annual income, less any State disability benefit, which is currently €9,776 per annum for an individual, although this is likely to reduce following this afternoon’s budget!

An example of this calculation is as follows;

Assume the case of an employed G.P. earning €90,000 per annum.

€90,000 X 75% = €67,500 Less the State benefit of €9,776 = €57,724.

This means that the maximum income protection benefit that they could apply for is €57,724 per annum. They will also receive the State benefit of €9,776, bring their total gross annual income with an income protection plan to €67,500, 75% of what they previously earned.  Without an income protection plan, they will only have the State benefit of €9,776 or 10.86% of their previous salary.  This is normally not enough for someone to live on, taking into account their usual monthly expenses.

Assume that this G.P. is a male, non-smoker and 40 years of age.  He has some savings, but only enough to keep him and his family going for up to 3 months.  He would like to make sure that his cover will continue until his planned retirement age of 65.

The monthly cost for a policy that will provide all of the benefits that are being looked for here is €137.25.  This is for a policy with all the bells and whistles.  It includes full cover and all
the optional extras such as an increasing benefit, so the amount paid during a claim will increase every year.  The cost quoted is after tax relief has been availed of.

So, what will this €137.25 per month get for him?  It will ensure that he continues to receive a generous salary every single month if he is unable to work as a G.P. due to any accident, illness, injury or disability. The insurance company will continue to pay him an increasing salary until he is 65, returns to work or dies.

Ways to reduce this premium are to reduce the amount of benefit you get every month – for instance, would you survive on €50,000 per annum?  Maybe you have sufficient savings
or family support to keep you financially secure for 6 months instead of 3, in which case the life assurance company will only have to pay out benefit once you are out of work for 6 months or longer, thus reducing the risk to them, thus reducing the premium for you.

Each case is different. 

We tailor plans to meet your own specific needs.  Call us today on 1890 254 000 to organise an obligation free appointment to discuss your needs.