Should you get income protection insurance?

An income protection policy could help cover your bills while you’re off work due to an injury or illness, by paying some of your income. Here’s how it works, what it costs and how to choose the right policy for you.

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What is income protection insurance?

Income protection is an insurance policy that offers financial support after a set term.

It works by covering part of your salary when you’re unable to do your job through sickness or injury.

What is the deferred period?

It’s the waiting time from when you’re first off work to when the policy starts paying out.

You can set a deferred period from between 4 to 52 weeks, the longer the delay, the cheaper your cover will be.

To choose the right term, you should check your company sick pay entitlement and work out how long you could manage your bills without extra support.

Who can get income protection in Ireland?

To qualify for an income protection policy, you need to be either:

  • Employed for over 16 hours a week
  • Self employed

You must also be within the age limits for the policy start and end date. Cover can start between 18 and 59 and go up until you reach 70 with some providers.

What else affects eligibility?

The job you do can affect whether or not you’re eligible for income protection.

Each occupation type is given a class rating from 1 to 5. Class 1 jobs e.g. accountants carry the lowest risk in relation to sickness or injury so the monthly premiums will be lower.

Class 5 jobs e.g. prison officers and tradespeople are deemed the most risky, and can result in very high premiums, or being refused insurance.

You can find out more about classes of jobs on the CCPC website.

How much cover can you get?

You can choose an amount up to 75% of your income before tax, minus any state illness benefit you’re entitled to.

Each insurance provider also sets a maximum yearly limit on the amount you can claim e.g. €250,000.

For example:

If you earn €60,000 a year (before tax) and opt to protect 75% of your income, that reduces the amount to €45,000. €45,000 minus the state illness benefit of €10,556* (€203 per week) is €34,444.

  • €34,444 is the amount you can insure per year, or €2,870 a month.
  • €2,870 is the monthly amount you would receive if you made a successful claim, until you returned to work.

If you’re self employed and earn €60,000, you could claim for the full 75% (€45,000) because you’re not entitled to the state illness benefit. This would give you €3,750 a month.

*The amount you qualify for depends on your average weekly earnings for the relevant tax year

When are you not entitled to claim?

There are some scenarios where you won’t be entitled to claim income protection.

They include:

  • Working a second job: If you are still working a second job, you’re not entitled to claim payments for your primary job.
  • Job loss: Unfortunately, if you lose your job while you’re claiming on your income protection policy, the payments will stop.

Income protection only applies if you’re unable to work because of an illness or injury, so it doesn’t apply if you lose your job for any other reason, like redundancy.

How long can you claim for?

You can claim for as long as you’re off sick through illness or disability, up until either:

  • You return to work
  • Your policy term ends
  • Your death

You can make multiple claims on the same policy.

What additional benefits can you get?

Some providers may charge extra for benefits that others include as standard so always compare quotes and policy details.

Here are some of the benefits that may be included or cost extra:

  • Guaranteed increase option: This allows you to top up your cover at specified intervals, without answering any further questions about your health, job etc. It’s the original cover amount that the increase is applied to each time.
  • Premium waiver: This gives you a break from your monthly premiums while you’re making a claim. When you return to work, you continue to pay your premiums.
  • Terminal illness benefit: If you’re diagnosed with a terminal illness and have less than 12 months left to live, payments will start straight away.
  • Back to work benefit: This provides extra financial support for a set period when you return to work full time after being off for a qualifying period e.g. over 12 months.
  • Hospital benefit: If you’re hospitalised during your deferred period, you’ll get a daily income for each day you spend in hospital after during this term, up to a maximum number of days e.g. 90 per hospital stay.
  • Occupation change: If you change jobs, your plan will continue even if you move into a higher risk job class.
  • Partial benefit: If you have to return to work part time or on a lower income due to your illness or disability, you could get payments to bridge the gap in your earnings.
  • Life cover benefit: Some policies offer a lump sum payout if you were to die during the term.
  • Specified illness benefit: If you’re diagnosed with an illness that’s specified in the policy details, you’re eligible for a once-off lump sum payment.

Types of salary protection

Personal plans are designed and paid for by an individual, while group or executive plans are organised by an employer.

Additionally, you’ll need to choose between Guaranteed premiums or Reviewable premiums.

A guaranteed protection policy

This offers you peace of mind that your payments will stay the same throughout your policy.

This can make budgeting easier as there’ll be no nasty surprises down the line.

You may initially pay more than with a reviewable policy, but over time, it’s likely to be the cheaper option.

A reviewable protection policy

With this type of policy, your payments may change over time.

Your insurer will periodically review your payments for reasons like your age, and may decide to increase them.

This gives you less control over the total cost you’ll pay over the term, although your payments may initially be lower than with a guaranteed plan.

You may be given the option of reducing your cover or removing extra benefits in order to maintain your current premium..

How much does income protection insurance cost?

There are many variables that can affect the initial and ongoing cost of income protection, including:

  • Your age: The older you are, the higher your premiums will be. They will also increase as you get older, if you choose a reviewable plan.
  • Smoking status: If you’re a smoker or have smoked in the last 12 months, your premiums will be higher than if you were a non smoker.
  • Medical history: You’ll need to answer questions about your health when you apply for income protection and any conditions that make you a high risk will increase your premiums.
  • Amount of cover: Your income and the percentage you choose to protect will affect the cost - the higher the cover, the more you’ll pay.
  • The job you do: A class 1 job that’s low risk comes with lower premiums than a class 4 or 5 job that’s considered very risky.
  • The deferred period: The shorter the period, the more you’ll pay because the cover starts sooner and will run for longer during each claim made.
  • Additional benefits: A standard policy will be cheaper than one that includes add-ons you’re charged extra for.
  • Guaranteed vs reviewable premiums: Premiums may start out higher with a guaranteed policy but they can never increase. Reviewable premiums can increase over time and the overall cost for the term is likely to be higher.
  • Indexation: Keeping up with inflation will increase your premiums each year, usually by 3.5%.

When you apply for income protection, you must answer all questions fully and honestly. If you’re later found to have withheld information, you may not receive any payout in a claim.

What is indexation?

This is where cover increases in line with inflation. For example, your premiums may go up each year by 3.5% in exchange for a 3% increase in cover.

The indexation option offers some protection against rising living costs if you have to make a claim.

Do you have to pay tax on the premiums?

You’re entitled to tax relief on your premiums at the highest rate of tax you pay, up to a maximum of 10% of your annual salary.

You can find out more about how to claim tax relief on the website.

Who offers income protection insurance in Ireland?

There are some insurance brokers who can help you find an income protection policy and four main insurers who offer it:

  • Aviva
  • Irish Life
  • New Ireland
  • Royal London
  • Zurich

Here’s a breakdown of the basic terms that apply for most providers:

Insurance provider Deferred periods Max age at entry Max term age Max sum assured
Aviva 4, 8, 12, 26 or 52 weeks 60 70 €262,500
Irish Life 13, 26 or 52 weeks 54 65 €250,000
New Ireland 8, 13, 26, or 52 weeks - 65 €250,000
Royal London 4, 8, 13, 26 or 52 weeks 59 70 €262,500

How to choose the right income protection cover

There’s a lot to consider when choosing an income protection policy. It’s worth spending time finding the right policy and getting financial advice if you’re still unsure.

Here are some of the main things to think about:

  • The deferred period: This impacts the cost of the policy so choose an insurer that offers cover from when you need it.
  • The amount of cover: Get as much cover as you need and can afford. If you’re worried about your needs changing, make sure your policy allows you to top up your cover.
  • Cover benefits: Work out what benefits you need and see what each insurer includes as standard.
  • Using a broker: You could save time letting a broker gather quotes for you from all the insurers, rather than going direct to each insurer. Just check for any fees they may charge first.
  • Length of cover: Check the maximum term age if you’re planning on working beyond 65. You should also think about when your bills will reduce e.g. your mortgage.

If your quotes are higher than you can afford, try adjusting the amount of cover or benefits until it’s more affordable.

Is income protection cover worth it?

This really depends on your individual circumstances combined with factors like your age on application, your job class, and other insurance you may have.

It can depend on:

  • If you’re relatively young when you take out income protection and your job is low risk, it can offer peace of mind at a reasonable monthly cost.
  • If your job is in a high risk class, you’re a smoker, or you have a poor medical history, your premiums are likely to be steep so you’ll need to weigh up your need vs affordability.

What are the benefits?

  • Income protection isn’t limited to specific illnesses like with serious illness cover
  • You can make multiple claims on the same policy.

It’s worth comparing other types of insurance that can offer financial support too though and checking what other cover you may already have.

Our guides on the following types of cover - Mortgage protection insurance, Life insurance, and Critical illness cover - are a good place to start.

What is the difference between income protection and critical illness cover?

The main differences include:

Income protection

  • Applies to any long term illness
  • You’ll get monthly payments
  • Typically less costly than critical illness cover
  • Can take between 4 and 52 weeks for payment

Critical illness cover

  • Applies only to illnesses specified in the policy
  • You’ll receive a tax free lump sum per claim
  • Can be more expensive
  • You can receive your funds more quickly

Income protection insurance FAQS

Can I get back any of the premiums I’ve paid?

No, it isn’t a savings plan so you can’t cash your premiums in.

You must also maintain your payments for as long as you need protection. If you stop paying your premiums, you won’t be eligible to claim.

What happens if I can't get income protection insurance?

If you have a high risk job e.g. manual work that means you can’t get an income protection policy, there is a cheaper alternative that works in the same way called Wage Protector.

The period you can claim for may have restrictions and terms attached so check the small print before you sign up.

Alternatively, Mortgage protection insurance, Life insurance and critical illness cover are other types of insurance to consider.

What happens if I change jobs?

It depends on the insurance provider and policy you’ve taken out. In some cases it doesn’t affect your premiums or the cover you would get in a claim.

However, you should check your policy details and then contact your insurer if you’re still unsure.

Letting your insurer know about your new job will ensure you’re still covered in the event of a claim, even if this means paying a higher premium.

When can I cancel my income protection policy?

You can cancel at any time but your benefit will cease immediately, meaning that you won’t be eligible to claim if you then become unwell.

You should think carefully before stopping your policy because you’ll almost certainly have to pay a higher premium in the future due to your age or any health conditions you might develop.

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