# Is income protection insurance essential?



## livEwirE (25 Nov 2020)

Hey all,

Looking for some feedback on income protection.

Here's some background...
I'm changing from a full time job to a contractor role shortly.
I've had a financial review and been advised to sign up to income protection at €159 per month! 
44 years old, no kids.
I've never had income protection before and am not sure that I need it now. I'm in reasonably good health and do not have any ongoing illnesses.

Is income protection  essential?

What do people think I should do in this case?  Do I really need this?   I already have a serious illness policy.

Thanks in advance, all feedback is VERY welcome!


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## Steven Barrett (25 Nov 2020)

I think it is essential for all workers. Serious illness will only pay out if you get a defined illness and it is a lump sum. 

I was watching Sean Cox's wife on the Late Late recently. This is a man who went to a football match, got attacked and his life is changed forever. It is an extreme example but that it was the policy is for, to make sure if the unlikely happens, you are protected financially. As a result of the programme, I reviewed my own income protection. I am the age as you so the premiums are higher but you can reduce it by taking out reduced cover, extended deferred period, earlier retirement age. You also get tax relief on the contributions. 


Steven
www.bluewaterfp.ie


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## NoRegretsCoyote (25 Nov 2020)

It depends very much on your own circumstances and preferences. You don't have dependents for example which is relevant.

But at your age you are far, far more likely to have a life-limiting disability than to drop dead.


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## 50andOut (25 Nov 2020)

I am surprised that's how much income protection costs tbh, pretty large fee €1800 p.a.?
You mention serious illness policy, I would have thought this is sufficient to cover the issues mentioned above

Without further info though its hard to comment - what is your overall financial status?

What are your annual income v expenses?
What savings do you have?

50+o


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## livEwirE (25 Nov 2020)

My Income €90k, wife €55k.
Both have pensions, mine is personal at €500 p/m,  my wife's is with her job - public service.
No savings as such, although have 10k in a joint account.
We both have serious iIlness cover.  She has income protection with her job.
Expenses - 2x car loans.
€150k outstanding on mortgage, €1300 pm/overpaying by €200 but will be increasing to €500.


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## LDFerguson (25 Nov 2020)

I believe that Income Protection is essential, more so than specified serious illness cover.  As Steven says above, specified serious illness cover will only pay a lump sum if you get one of the listed, specified illnesses.  Income Protection will pay a claim for ANY illness or injury that prevents you doing your job. 

I regularly have people coming to me after they've had a child, looking to start life insurance cover to protect the family, which is prudent.  Yet statistically it's far more likely that a person will get sick than drop dead.  

With two earners you may not need to cover the maximum amount of your income.  You could insure yourself for a lower amount which would keep the show on the road along with her salary if you were off sick.   

Regards, 

Liam
www.ferga.com


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## livEwirE (25 Nov 2020)

The quote of €159 is to cover an income of €35k.  I can claim tax relief on it so the actual cost to me would be around €100 per month which I think I'd be comfortable enough to pay.


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## Protocol (25 Nov 2020)

To compare premium, this is what I pay in a work scheme:
0.86% of gross salary, and I get tax relief on that

35,000* 0.0086 = 301 pa premium, less 40% tax relief

Broker = Cornmarket,  insurer = Irish Life

You are being asked to pay 159 pm.
My policy would charge 25 per month on that salary


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## Protocol (25 Nov 2020)

Would you get 40% tax relief on a 35k salary?

*SORRY, EDIT*

I see I made a mistake.

Your salary is 90k, and the IP will provide 35k, ok, sorry.


159 pm = 1908 pa, that is 2.12% of salary

I pay 0.86% of salary, and it replaces 75% of my former salary, after my work sick pay runs out.


Your 2.12% seems high to me, but of course it's for a self-employer person.


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## LDFerguson (25 Nov 2020)

livEwirE said:


> The quote of €159 is to cover an income of €35k.  I can claim tax relief on it so the actual cost to me would be around €100 per month which I think I'd be comfortable enough to pay.



Sounds like a 13 week waiting period and a ceasing age of 65, with escalation in both a claim and each year regardless of a claim.  Several ways you can bring that quote down a bit.  Lengthen the waiting period.  Change the ceasing age.  Quote without escalation.  But of course you're getting less coverage by doing any of those, as each of them has a purpose.  

By the way - you say that you're moving to contracting shortly.  Will you be working through your own limited company?  If so you can set up Income Protection as a scheme of your own company.  Small reduction in price but more importantly, the company pays the premium, it's a deductible trading expense for tax purposes and not part of your salary and it's not a BIK for you.


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## LDFerguson (25 Nov 2020)

Protocol said:


> 159 pm = 1908 pa, that is 2.12% of salary
> 
> I pay 0.86% of salary, and it replaces 75% of my former salary, after my work sick pay runs out.
> 
> ...



I'm assuming that you're part of an Income Protection group scheme arranged by Cornmarket for your area in the Public Service.  As such, it's probably a scheme with thousands of members.  Cornmarket has used bulk buying power to get a good rate for the scheme from Irish Life.  Those who are self-employed or who don't have a group scheme to join have to pay individual rates.


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## Steven Barrett (25 Nov 2020)

Protocol said:


> To compare premium, this is what I pay in a work scheme:
> 0.86% of gross salary, and I get tax relief on that
> 
> 35,000* 0.0086 = 301 pa premium, less 40% tax relief
> ...



Read the terms and conditions of the Irish Life contract. Worst policy on the market. I have never recommended their product to anyone. 


Steven 
www.bluewaterfp.ie


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## gianni (25 Nov 2020)

It is essential for me. My salary is my biggest asset. I would be in a lot of financial strife if I were to lose it.


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## livEwirE (25 Nov 2020)

@ LDFerguson, yes, initially I am working under an Umbrella company but will be setting up my own limited company in Jan/Feb 2021.  Thanks for the tip about setting up the scheme as part of the company, I'm new to all of the contracting stuff so didn't realize that!   I may hold off until then.


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## LDFerguson (25 Nov 2020)

livEwirE said:


> @ LDFerguson, yes, initially I am working under an Umbrella company but will be setting up my own limited company in Jan/Feb 2021.  Thanks for the tip about setting up the scheme as part of the company, I'm new to all of the contracting stuff so didn't realize that!   I may hold off until then.



There are similar opportunities in relation to your pension when you start operating through your own limited company with similar benefits.  Your company can pay pension contributions as tax-deductible business expenses, separate from your salary.  The company pension arrangement should ideally be set up at the start of your employment with the limited company, with the contributions deemed to be company contributions.  Revenue aren't fond of "salary sacrifice" arrangements where you reduce your salary later, in order to afford a company contribution.


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## Alkers86 (25 Nov 2020)

SBarrett said:


> Read the terms and conditions of the Irish Life contract. Worst policy on the market. I have never recommended their product to anyone.
> 
> 
> Steven
> www.bluewaterfp.ie


Care to expand? Out of interest, we are with Aviva but would be good to know!


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## Alkers86 (25 Nov 2020)

@OP if you went with the income protection, you could probably cancel the serious illness policy.


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## Steven Barrett (26 Nov 2020)

Alkers86 said:


> Care to expand? Out of interest, we are with Aviva but would be good to know!



You can read them below.








						Income Protection's Terms and Conditions - Bluewater Financial Planning
					

There are 4 providers of income protection in Ireland, each with their own hidden bits. I looked into income protection's terms and conditions for you.




					www.bluewaterfp.ie
				











						Income Protection Terms and Conditions Update - Bluewater Financial Planning
					

Almost 6 years ago, I wrote an article about the terms and conditions of income protection policies. After Friends First and Aviva merged, I thought it was a good idea to read through them again to see what has changed. There are now four income protection providers in Ireland, Aviva, Irish...




					www.bluewaterfp.ie
				




A good reminder to update this after the merger between Friends First and Aviva. The Aviva contract is in effect the old Friends First one. They had the best contract available.

Steven 
www.bluewaterfp.ie


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## Alkers86 (26 Nov 2020)

SBarrett said:


> You can read them below.
> 
> 
> 
> ...


Thanks for that!


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## Acorn22 (29 Nov 2020)

SBarrett said:


> You can read them below.
> 
> 
> 
> ...


out of interest are there fees included in monthly fee if so how much?  How can you waiver these?


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## Steven Barrett (30 Nov 2020)

kingvagabond said:


> out of interest are there fees included in monthly fee if so how much?  How can you waiver these?



Protection policies are usually paid for by commission which is built into the premium. You can get a reduced premium by paying a fee up front to put the policy in place. In my experience, people don't like doing this. 


Steven 
www.bluewaterfp.ie


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