Do you have Income Protection?
Over the years dealing with clients and in general from speaking with friends and family, when this question is asked, I am surprised that the answer can be ‘I don’t know’. Employees often are not sure what their sick pay arrangement is or if they have any long-term cover if they are unable to work due to illness or injury. Some employees just accept that they do not have any long-term illness cover through work and may not be aware that they can arrange this cover themselves. We all insure our cars, homes and even our phones but why not take out insurance to protect our income?
Income Protection is a vital benefit for those who are self-employed or sole traders, these individuals are solely reliant on their ability to work to earn an income. We recommend that all clients have at least 6 months earnings as an emergency fund but after this if you are unable to work due to illness or injury how will you continue to maintain your lifestyle and pay bills? This is where Income Protection comes in.
What is Income Protection?
An Income Protection Policy (also known as Permanent Health Insurance or Disability Cover) is an Insurance Policy which provides continuation of income to you (after an initial waiting period) should you be unable to work because of illness or injury and suffer a loss of earnings. The waiting period can be as short as 4 weeks or as long as 52 weeks. The maximum income protection cover allowable is 75% of taxable earnings less the entitlement to the State Illness Benefit (if applicable). If you have a valid claim under this policy the Insurance Company will continue to pay you a monthly income until such time as you are able to return to work.
Can I afford to pay the premium for Income Protection?
The next question we would usually get in relation to Income Protection is about the cost. To give you an idea of cost I have ran a quote for a sample client. This client is a 35-year-old female accountant, who is a non- smoker and earns €60K per year. She does not have any existing Income Protection cover and should be entitled to the State Illness Benefit.
The premium to protect this client’s income is €62.34 per month. The Income Protection Benefit is €34,184 per annum (€60K x 75% less State Illness Benefit) and this cover is until age 65. A waiting period of 26 weeks applies.
The premium quoted above is the gross premium. With Income Protection you can claim full tax relief on the premiums you pay (up to a maximum of 10% of your income) at your marginal rate of tax. Therefore, for my sample client the actual cost to her is €37.40 per month after taking account of tax relief at 40%.
My question to you now is, can you afford not to have Income Protection Cover?
Having Income Protection gives peace of mind that if you are unable to work for the long term due to an illness or injury you will have a replacement income at a time when you need it most.
If you would like to find out more about Income Protection, please contact Michelle Coakley at email@example.com or speak to your Invesco consultant.
By Michelle Coakley
Client Relationship Manager
Michelle joined Invesco in 2019 following the acquisition of City Life having worked with City Life since 2013. Michelle is a Qualified Financial Advisor (QFA) and Retirement Planning Advisor (RPA). She graduated with a degree in Commerce from UCC in 2012. As Client Relationship Manager in the Cork Office, Michelle manages and services new and existing clients.