By Dave Kavanagh
When advising clients and analysing their finances, I ask them how long (if at all) their employer will pay them if they are out of work long term due to illness or injury. In some cases, it is standard and can be something like 3 months at full pay, then 3 months at half pay and then a pensionable rate of pay. For many, they are not sure and when they look through their employment contract, it states “at employer’s discretion”. Many people realised how vulnerable they were when the pandemic arrived, dropping some incomes from €600 or €800 per week down to €350 of PUP. Many don’t give much consideration to how they would cope if they suffered a loss of income for an extended period because they think “it’ll never happen to me”. Sadly, many find out the hard way following an injury or illness that keeps them out of work for months or even years. This is where having Income Protection in place, can be the difference between maintaining a level of income that keeps your lifestyle virtually unchanged, or dropping to a level that could force you to use up any savings and also get into financial difficulty.
So how does it work? Depending on your circumstances, you choose an appropriate level of cover. This is based on not exceeding 75% of your salary, less any state income entitlement. You also choose a “deferred period” which refers to how long you are off work before payments commence. The premiums are based on factors like your age and occupation, as some occupations would leave you more at risk of not being able to work. There is also tax relief on premiums paid for income protection, which could mean up to 40% of your premium is refunded by way of adjusting your tax credits. If dropping from your current income to the state benefit of €208 per week is something that would impact badly on you, perhaps it is time to consider.
Dave Kavanagh QFA has been advising people financially for over 25 years. For quotes or information (with no cost or obligation) he can be contacted by emailing firstname.lastname@example.org or use the contact form on www.financialcompanion.ie or phone 087-6414570, or @Davekav_advice on Twitter and Instagram. Combined with his previous role of gym/nutrition adviser, he regularly gives talks and workshops at seminars and events for groups, companies and government departments on financial wellbeing,