What is Income Protection?
Income protection is sometimes called permanent health insurance or salary protection. It is an insurance policy that gives you a replacement income if you can’t work because of illness or injury for 3 months or more.
Income protection can give you up to 75% of your normal income (up to a maximum benefit of €262,500, less any social welfare payments). This lets you cover your regular expenses and protect your family’s lifestyle.
Your policy will also include a range of benefits and resources to help you get better or prepare for a different career.
How does Income Protection work?
You make a monthly, tax-deductible payment, known as a premium. The cost depends on your age, occupation, health status, whether you are a smoker, and how much of your income you want to protect. In return, you receive regular payments when you need them most – when illness or injury prevents you from earning.
Your payments begin after your deferred period, which you choose when you take out your policy. This is the length of time from when you stop working to when we start paying your income protection benefits. It can be 13, 26 or 52 weeks. If you choose a deferred period of 13 weeks, it means you must be unable to work for 13 weeks before your income protection benefits will begin.
During this time, you may be getting sick pay from your employer so you will not need your income protection. If you are self-employed, you will not have any income during this period. The longer your deferred period, the lower your premiums will be.
Your income protection payments will continue until you are ready to go back to work full or part-time, or until your policy ends (usually on the day you retire).
What is the advantage of having Income Protection?
If you have only one source of income and you can’t work due to illness or injury, your employer will only pay your salary for a period of time. If you are self-employed, you will have no income at all.
You may have to rely on your savings, if you have them. But think about this: the average income protection claim lasts for 4 years. €50,000 savings would only last for 3 years based on spending €3,000 a month on your mortgage repayments, car loans, food bills and other expenses.
You can apply for the State Illness Benefit to help you pay your bills. However, this is just €193 per week (as of March 2017) and for many of us, this simply is not enough to cover our basic expenses.
By taking out income protection, you can replace up to 75% of your original earnings (up to a maximum benefit of €262,500, less any social welfare payments). So you will be able to pay your bills and maintain your financial security when you need it most.
Who is eligible for Income Protection?
You must be in full-time paid work as a self-employed person, or as an employee or company director to qualify for income protection. Your occupation, health status and age could also affect your eligibility for the cover.
How is Income Protection different from Specified Illness cover?
You can make a claim on your income protection if any illness, injury, accident or disability prevents you from working. You can make a claim on your specified illness cover if you are diagnosed with an illness named in your policy.
Income protection gives you a regular income until you are able to return to work or until your policy ends. Specified illness cover gives you a once-off lump sum payment.
You can claim tax relief on your income protection premiums. There is no tax relief on specified illness cover premiums.
Income protection lets you make as many claims on your policy as you need. Specified illness cover allows for one successful claim.
What are the main benefits provided by Income Protection?
As well as your monthly benefits payment, income protection from Friends First may also include the following in some circumstances:
- Hospital cash benefit: A daily replacement income is paid if you are in hospital for more than seven days during your deferred period
- Rehabilitation services: Recovery means a chance to work or start a new career. For example, we work closely with the Irish Centre for Occupational Rehabilitation to help you continue your normal, everyday activities during your recovery. Our resources and assistance are designed to help you get back into the workforce when you are ready
- Relapse benefit: We pay out immediately if you have a relapse within 6 months of returning to work
- Proportionate benefit: If you return to work but are not in a position to get back to your previous earnings, we will pay you the difference between your old and new salary. This will depend on the benefit amount you choose
- Partial benefit: If you return to work on a part-time basis, we will pay you the balance of your full benefit so you can maintain your standard of living
- Claims assistance: Independent professionals are available to guide you through the claims procedure and to discuss your rehabilitation options with you
- Return-to-work assistance: Our Occupational Health Specialist can support you in re-entering the workforce and making sure your new working environment is appropriate to your needs
- Career change: With the help of a career transition consultancy, we will support you in training for a new career if you can’t return to your original job
Your Income Protection plan in action
If I can't work due to an illness or injury, how long will I have to wait before getting my Income Protection benefits?
You will get your income protection benefits after a short waiting period that you choose when you are setting up your policy. This is known as the deferred period and can be 13, 26 or 52 weeks.
If you choose a deferred period of 13 weeks, it means you must be unable to work for 13 weeks before your income protection benefits kick in.
How much income will I get after the deferred period?
This depends on your policy and how much of your income you have chosen to protect. It is usually 75% of your income before you became ill or disabled. The maximum benefit you can claim is €262,500 per year, less any other income you get while out of work, such as sick pay or State Illness Benefit.
How do I claim tax relief on my Income Protection premiums?
You will need to include your income protection tax certificate with your annual tax return. We will give you the certificate when we send you your policy. Alternatively, you can ask your employer to deduct the tax relief directly from your pay by what is known as the net pay arrangement. Your local PAYE office can give you more details.
How long will you pay my Income Protection if I am out of work?
Income protection pays you a regular income until you are able to go back to work or until your policy ends (usually on the day that you retire).
How many times can I claim on this policy?
You can make as many claims on your income protection as you need until your policy ends.
How do I make sure my Income Protection benefit keeps pace with inflation while I am claiming?
When you are setting up your income protection policy, you can choose an indexation option which will increase the payments you make and the benefits you get so that they keep pace with inflation (the rising cost of living). That way, if your salary increases over the years, so does your income protection.
If things change
If my salary changes, how will this affect my Income Protection?
If your salary changes, you can change your income protection cover too. There are a few different ways to do this.
When you are setting up your income protection policy, you can choose to increase the payments you make and the benefits you get every year. This way, they will keep up with the rising cost of living (inflation).
If you don’t go for that option, you can contact us to increase or decrease the amount of income you want to protect. We will need evidence that your health has not changed.
Our income protection policies also include an automatic benefit that lets you increase your cover by up to 20% every 3 years, without having to provide evidence of your health.
Note: We can give you a maximum income of 75% of your income (up to a maximum benefit of €262,500), less State Illness Benefit of €10,036 (as of March 2017) per year for employees. If you are self-employed, you cannot claim the State Illness Benefit.’
If I am out of work and claiming on my Income Protection, do I still have to make my monthly or annual payment to you?
You don’t have to continue your monthly or annual payments while you are getting a replacement income from your policy. In this case, we will make your payments for you. When your claim finishes you will need to start making your payments again. This benefit is called waiver of premium.
Will my Income Protection be affected if I change job?
We will continue to provide cover if you change jobs, regardless of what your new job entails.
What happens if I lose my job?
If you lose your job, your income protection policy will continue while you are looking for another one.
So although you can’t make a claim on your policy while you are unemployed, you won’t need to reapply for cover when you find a new job.
Will my Income Protection policy still cover me if I leave the country to work abroad?
Yes. If you are living within the EU you will have full cover from your income protection policy.
If you are living outside the EU, you can still make a claim on your income protection. We will pay your income for 13 weeks in any 52 week period, or 39 weeks in total.