How Does Income Protection Work In Ireland?

Looking for proper guidelines related to income protection in Ireland?

Income protection insurance is a financial safety net designed to replace a portion of your income if you can’t work due to illness or injury.

It’s an essential consideration for anyone who relies on their earnings to pay bills and support their lifestyle.

In Ireland, income protection can cover up to 75% of your gross salary (after illness benefit if applicable), ensuring you have financial security during tough times.

Having this insurance means you can focus on recovery without worrying about your finances.

In this blog, we will help you to discover how income protection insurance supports you during illness or injury. Learn about key features, policy terms, claims, and benefits.

Income Protection Insurance is a type of policy designed to provide financial support if you’re unable to work due to illness or injury.

In Ireland, this insurance helps to replace a portion of your income, ensuring you can maintain your standard of living while focusing on recovery.

Unlike other forms of insurance that offer a lump-sum payment, income protection pays out a regular benefit, on a monthly basis, until you can return to work or reach retirement age / the end of your policy term.

Regular income replacement:

The primary purpose of income protection insurance is to replace a significant portion of your lost earnings, typically up to 75% (less state illness benefit) of your pre-tax salary.

This ensures you can cover essential expenses like mortgage payments, bills, and daily living costs.

The benefits are usually paid out after an initial waiting period, known as the deferment period or waiting period, which can range from a few weeks to several months.

Deferment or waiting periods are normally 4, 8, 13, 26 or 52 weeks. The longer the waiting period the cheaper the income protection policy.

Payments continue until you recover and return to work, reach the end of the policy term, or hit the specified retirement age, depending on the terms of your policy.

In Ireland, premiums paid for income protection insurance may qualify for tax relief at your marginal rate of 10% tax of total income, making it a more affordable option for many individuals.

In our example above this reduces the cost of the premium from €62.10 per a month to €56.00 per month.

You will still have to pay the premium price every month and apply for a income tax refund every year. You can do this through the myaccount section of revenue.ie.

Policies can be tailored to suit your specific needs, with options to choose the level of cover, deferment/waiting period and the term of the policy.

You can also add a feature called indexation which adjusts the policy for cost of living increases.

Income Protection Insurance is a valuable safety net for individuals who rely on their income to support themselves and their families.

By understanding the key features and benefits of these policies, you can make an informed decision about securing your financial future.

Here’s a detailed look at how income protection works:

Income protection insurance typically covers a significant portion of your income, usually up to 75%, depending on the policy.

The regular payment is taxed as normal salary. You add your life company to your tax record as an employment. The easiest way of doing is through the my account section of revenue.ie

Income protection can be used to cover essential expenses such as mortgage payments, utility bills, and daily living costs.

The benefit payments continue until you can return to work, reach retirement age, or the end of the policy term.

When taking out an income protection policy the type of occupation you have will impact the price of the policy. The more physical the job the higher the likely cost of the premium. Occupations are broken into 4 occupation classes.

There is usually a waiting period before the benefits begin, often referred to as the deferred period. This period can range from a few weeks to several months, depending on your policy.

During this time, you will need to rely on other sources of income, such as savings or employer sick pay.

Some income protection policies offer limited coverage, providing benefits only if you suffer a severe and permanent disability that prevents you from performing any paid work.

However income protection policies are a lot more flexible then serious illness policies that are much more restrictive.

It’s important to understand the specifics of the policy you are considering, as some may only compensate for permanent total disability.

Make sure to thoroughly review the terms to ensure you know the extent of the protection you’re purchasing.

The cost of income protection insurance, known as the premium, varies based on factors such as your age, occupation, health, and the level of coverage you choose.

Premiums can be paid monthly or annually, and some policies offer level premiums, which remain the same throughout the policy term, while others may increase over time.

Claiming income protection in Ireland involves several steps to ensure you receive the financial support you need during periods of illness or injury. Understanding the process and requirements can help streamline your claim and reduce stress during challenging times.

Before making a claim, it’s crucial to thoroughly review your income protection policy.

1. Familiarise yourself with the terms and conditions.
2. Know the waiting time/deferment period (the time you need to be off work before benefits start).
3. The benefit period (what age the benefit stops).
4. Any exclusions or limitations that may apply.

As soon as you realise you will need to claim, inform your insurer. Most insurers require prompt notification to initiate the claim process.

Be prepared to provide initial details about your illness or injury and any relevant medical information.

Your insurer will provide a claim form, which you must complete accurately and thoroughly. This form typically requires details about your medical condition, employment status, and financial situation.

Ensure all sections are filled out correctly to avoid delays in processing.

Submit any required supporting documentation with your claim form. This often includes medical reports from your doctor, proof of income, and possibly a statement from your employer.

The more comprehensive and detailed your documentation, the smoother the claims process will be.

Once your claim is submitted, your insurer will assess it. This may involve further medical examinations or requests for additional information.

Patience is key during this stage, as the assessment can take some time.

If your claim is approved, you will begin receiving your income protection benefits as outlined in your policy.

Payments are typically made monthly and can provide crucial financial support until you are able to return to work.

Revenue will consider this payment as an employement. Make sure your insurance company has been added to your employment record on Revenue.ie.

During the benefit period, your insurer may conduct regular reviews to monitor your condition and ensure you continue to meet the policy requirements.

Staying in communication with your insurer and providing any requested updates is essential.

By understanding and following these steps, you can navigate the income protection claim process with greater ease and confidence.

Income protection in Ireland offers crucial financial support during times of illness or injury, helping you maintain financial stability when you cannot work.

Understanding how income protection works involves knowing the policy terms, the claims process, and the benefits it provides.

By choosing the right policy and following the correct procedures, you can ensure your peace of mind and financial security.

If you have any questions or need assistance in selecting the best income protection policy for your needs, contact Greenway Financial Advisors.

Our expert advisors are here to guide you through the process and help you make informed decisions.

Get in touch with us today to protect your financial future.