Income protection insurance is one of the most overlooked yet significant types of insurance cover in Ireland. It is also one of the most valuable insurance covers. If your illness or injury prevents you from working, income protection can help keep your finances on track by replacing a part of your salary. In this blog, we will discuss what income protection in Clonmel is and whether it is worth investing in.
What is income protection in Clonmel?
Income protection is a way to provide financial protection to your family for unforeseen events. It is also known as salary protection and is a kind of life insurance policy that pays out a monthly benefit to replace a part of your lost income. The benefits under the income protection policy are offered after you are unable to work for a certain period. This time is regarded as the deferred period. This period is agreed upon by the policyholder at the beginning of their policy. It is often 4, 8, 13, 26 or 52 weeks.
What are the benefits of income protection insurance?
When everything is moving smoothly in life, it is easy for people to take money for granted. It is paying your bills, letting you take care of your family and making you enjoy your hobbies and holidays. But what happens when an accident or long-term illness suddenly occurs and prevents you from earning a living? Things can be worse if you are the primary breadwinner of a household. That’s where income protection comes to the rescue.
- It provides you with an alternative income for situations when you are unable to work. It provides you with income for
- It covers any illness or injury that keeps you from working.
- You will continue to receive monthly payments unless you can return to work, retire, or your policy period expires.
- The policyholder can choose the amount of coverage they require and the start date after their illness or injury forces them to stop working.
- Up to 75% of your income is covered, minus any social welfare benefits.
- The policyholder might be eligible for premium tax relief up to the marginal tax rate
How does Income Protection Insurance work?
An income protection policy allows you to insure a specific amount of your income. The highest percentage of salary that can be covered is 75%. In some situations, it may be sufficient to cover a smaller percentage of your insurance. Your benefits will begin as soon as the deferred period is over.
What affects eligibility for Income Protection Insurance?
The eligibility of your income protection is affected by your occupation. Each occupation is provided with a class rating from 1 to 4. Some occupations are automatically declined, such as a fireman or pilot.
How much does it cost to invest in an income protection fund?
The premiums for the income protection fund depend on various factors, such as
- Age
- Health and smoking status
- Job (some jobs carry more risk)
- Level of cover
- Deferred period
How to choose the right deferred period?
Your deferred period is how long you should wait before the income tax policy starts paying for it. If your employer covers 13 weeks of sick leave, it usually makes sense to pick a 13-week deferred period. No sick pay? In such a case, you may want a shorter one. The shorter the waiting period, the higher the premiums needed to be paid
Why self employed must invest in income protection?
If you are self-employed, it means you don’t get sick pay. It also means that you will not be eligible for the State Illness Benefit either. This means that there will be no income to take care of your financial needs when you are unable to work. Income protection or self-employed is a way to create a safety net for self-employed individuals in Ireland. Also, as this tax is deductible, it is more affordable than you might think
Are there any drawbacks to income protection insurance?
There are some downsides to Income Protection Insurance.
- If you have certain pre-medical conditions at the time of taking the policy, it can raise your premiums. For instance, if there are pre-existing medical conditions, it can increase your Income Protection premiums (or in some cases mean that you cannot obtain cover at all).
- Before the payment under the policy begins, there is usually a waiting period that can range from a few weeks to several months
- The percentage of income generally covers only a portion of your income (usually up to 75%), which might not fully replace your salary.
- It is often more expensive than serious illness cover; however, both are used for different purposes
Protect your finances with Eolas Money
To choose the right policy, it is essential to seek advice from an independent financial advisor in Ireland who has experience and expertise in the industry. Eolas Money helps you make the right financial decisions. Get expert advice on critical illness cover, life insurance quotes, pension planning, and household budgets. Talk to a certified financial planner in Clonmel today.
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