Income protection – why you should consider taking it out
Q I am lucky to have a good job and get paid reasonably well, but I don’t get paid when I’m off sick. I constantly worry about being unable to pay my rent if I’m out of work for a prolonged period due to illness. What is the best way to cover this off?
A An Income Protection Plan will pay you a monthly income if you are unable to work due to illness, accident or injury, ensuring you continue to meet your monthly mortgage repayments and household bills while maintaining your current standard of living.
It will continue to pay you an income until you are well enough to return to work, or if not, until your retirement age.
Do I need it?
Yes, your income is probably your most important asset. You and your children depend on it from birth, right through to college and often beyond.
Many of us don’t think twice when it comes to insuring our homes and cars. Many also purchase insurance for our gadgets, when we travel and even our pets, but many neglect to insure our most important asset, our income.
Ask yourself, what would happen if your income suddenly stopped because of ill health? Or how long would your employer pay you if you were on prolonged sick leave? Or how would you and your family cope financially after that?
What is income protection?
An Income Protection Policy pays out if you can’t work through accident or illness. You must be out of work for a specified amount of time, but it will then pay you up to 75% of your income, less social welfare, right up to retirement age or when you return to work.
The premium depends on many things including your occupation, but tax relief of up to 40% is available on the premiums, depending on your income tax rate. You can claim as often as you like and premiums will not increase.
Income Protection is a form of insurance that helps employees, small businesses and company directors protect themselves and/or their employees against the financial impact of becoming too ill or injured to work, by providing a replacement income.
Even better, premiums qualify as allowable for income tax for personal cover or as business expenses that can be offset against corporation tax for an Executive Plan.
This article aims to give information, not advice. Always do your own research and/or seek out advice from a Financial Broker before acting on anything contained in this article.