Serious Illness & Income Protection

Serious Illness Cover is a tax free lump sum payment payable in the event of being diagnosed with a serious illness such as cancer, heart attack, multiple sclerosis, kidney failure and stroke to name but a few.

What is Serious Illness Cover?

This type of cover pays you a lump sum amount if you suffer from one of the specified illnesses covered on your plan. Serious Illness cover, also known as Specified Illness Benefit, pays you a lump sum on diagnosis of some of today’s most common illnesses. You can spend the lump sum however you like to maintain your standard of living or to help you and your family cope financially during a difficult time.

You choose the amount of cover you need and how to use it. For example, if you suffered one of the specified illnesses covered, the pay-out could go towards meeting your mortgage and loan repayments or everyday bills and expenses, leaving you to concentrate on getting better.

 

What is an Income Protection Plan?

An Income Protection plan is a policy which pays a percentage of your income (max 75%) if you are unable to carry out your own occupation due to an accident, illness or disability.

You can claim tax relief (at your marginal rate) on the cost of the benefit. In the event of a claim, the benefit is a gross payment, which is subject to tax etc.

Top Tip

It pays to look at the various plans to compare the differences in cover.

What would happen if I was out of work with an Illness or disability for a long period?
Your income is your most valuable asse! It allows you to pay for all your necessities plus all the things you enjoy doing. If you are unable to work for a prolonged period of time due to an Illness, disability or accident, you could face a large drop in income This drop in income could in turn place significant pressure on your ability to continue meeting your day-to-day expenses. You may be entitled to the social welfare benefit of €208.50 pw, however, for many people this only represents a small proportion of their income.
What would happen if I was out of work with an Illness or disability for a long period?
Your income is your most valuable asse! It allows you to pay for all your necessities plus all the things you enjoy doing. If you are unable to work for a prolonged period of time due to an Illness, disability or accident, you could face a large drop in income This drop in income could in turn place significant pressure on your ability to continue meeting your day-to-day expenses. You may be entitled to the social welfare benefit of €208.50 pw, however, for many people this only represents a small proportion of their income.
What deferred period should you choose?
The deferred or waiting period is the length of time you need to be out of work for due to an Illness or disability before a claim becomes payable. When taking out your policy, you choose the deferred period you think would suit you best. There can be significant differences in premiums based on the choice of deferred period. Cover with a shorter deferred period would typically cost more than a longer deferred period. For example, if you choose a deferred period of 8 weeks it will cost more than if you chose 13, 26 weeks or 52 weeks. Before you decide on the deferred period, check if your employer offers sick pay and if so, how much and for how long. This will help you to choose the most suitable waiting period.
How much will Income Protection cost me?

The monthly cost will depend on a number of factors including the following:

  • How old you are when you take out the cover.
  • How long you want the cover for. You can choose an expiry age from age 55 to age 70. The older the expiry age, the more expensive the cover will be.
  • The deferred period; the shorter the deferred period, the higher the cost.
  • Your general health.
  • Whether you smoke or not; smokers will be charged more than non-smokers for the same cover.
  • The level of cover you want, and whether you want this cover to increase annually.
  • Your occupation: typically, insurers classify occupations into different groups according to the risk of illness and disability attached to that occupation. Some occupations involving manual work are likely to be charged more for the same cover than someone in a lower risk occupation. Some occupations won’t be eligible for income protection.

Give us a call to find out more!

Can I claim tax relief on my income protection contributions?

The contributions you pay to your income protection plan are deductible for income tax against your earnings at your marginal rate. For example, if you pay tax at the 40% rate, for each €1 you pay for income protection you can claim 40 cent back in tax relief. This means an annual premium of €1,000 actually only costs you €600, after tax relief. Income protection cover, when payable, is paid subject to PAYE.

What’s the difference between income protection and serious illness cover?

Serious illness cover pays a tax-free lump sum on the diagnosis of an Illness specified in the policy. Income protection pays a replacement percentage of your income after the deferred period until you are fit to return to work or the expiry age of the policy, whichever is earlier. You may choose either Serious Illness or Income Protection or a combination of both.
The factors that may influence your decision are:

  • Do you need a lump sum benefit – to clear loans, medical costs or re-model your home – or do you need replacement of earnings?
  • Do you have earned income to replace? Income protection can only replace your earnings.
    Serious illness cover pays on diagnosis of the Illnesses specified in the policy. Assuming no exclusions, income protection pays for a wider range of reasons that may prevent you from working (e.g. depression, back injury).
  • You don’t know how long you will be unable to work. Income protection payments last until you are certified fit to work or up to the expiry age if necessary.
  • You may be eligible for both serious illness and income protection cover, or one or other of these covers may not be an option for you because of your occupation or medical history. This may determine your choice.
  • When you make a claim on your serious illness policy, that cover expires. If you claim on an income protection policy and return to work, the cover is still in force until the expiry age chosen at the outset, provided you resume paying your premiums.
  • Income protection premiums attract income tax relief at your marginal rate, however the benefit payment is subject to PAYE. Serious illness premiums have no tax relief, but the benefit is paid tax free.

Talk to us about the key differences between Income Protection and Serious Illness cover. We will be able to advise you which product is best suited to your needs.

Need Some Guidance?

Call us on:
Tel: (059) 913 3800