Income Protection Insurance
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What is Income Protection Insurance?
Income Protection Insurance, also known as ‘salary protection’ is a type of Life Insurance policy that pays out a monthly benefit to replace part of your lost income should you be unable to work due to illness, sickness, or disability.
You will receive your monthly benefit after being unable to work for a certain period of time. This is referred to as the deferred period. This deferred period will be agreed upon at the beginning of your policy and is often 4, 8, 13, 26 or 52 weeks.
Key note 📌For example, should you choose 13 weeks, you must be unable to work for a minimum of 13 weeks before your benefit payments begin.
How does Income Protection Insurance work?
An Income Protection policy works by allowing you to insure a particular amount of your income.
The highest percentage of salary you can cover is 75%. In some circumstances, it will be sufficient to cover a lesser percentage.
Your benefits will start as soon as your deferred period is over.
Income Protection Insurance covers you from any illness. Your benefit will pay you a percentage of your salary all the way up to retirement age, or until such time as you recover and return to work.
Who needs Income Protection Insurance?
Income Protection provides a financial safeguard should you be unable to work due to sickness, injury or disability.
Do you have limited sick pay from your employment? If this is the case then it may be worth looking into an Income Protection policy.
“Being a self-employed IT Consultant, I’ve always had to look after myself when it comes to benefits.
I contacted emero and met with Eoin who went through my options in detail and provided me with a plan going forward. Excellent service from start to finish.”
Eugene Brady- Income Protection client
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Have you insured what matters most?
Many of us spend time insuring our cars, holidays, and pets. Yet, all of these rely on you having an income.
If you had a machine that printed money at the end of every month, would you insure it?
The answer for most people would be a resounding yes. Income Protection Insurance allows you to protect your income against injury or illness.
Professions where Income Protection is most popular
Income Protection Insurance is particularly popular among certain sectors, industries, and occupations. These include:
What affects eligibility for Income Protection Insurance?
The main impact on your eligibility for Income Protection will be your occupation. Each occupation is given a class rating from 1 to 4. There are also some occupations that are automatically declined such as a fireman or pilot.
Unsure what class your occupation falls under? Please feel free to to click the button below and download your free ‘class breakdown overview’
Income Protection Classes 📌
Unsure of what class your occupation falls under? We have written a guide outlining different occupations along with their eligibility. Learn More
Benefits of Income Protection Insurance
Income Protection will provide you with a long-term cover until retirement should you need it.
Your premiums will be eligible for tax relief at your marginal rate of tax whether that be 20% or 40%.
You will be provided with a monthly benefit payment as long as your are unable to work or until retirement.
How much does Income Protection cost?
If you would like to see how much cover might cost, please use our free quote engine.
How much Income Protection Insurance do I need?
Figuring out how much income you need to replace will vary depending on personal circumstances.
Some people may have larger regular outgoings each month. Whilst some may have very little or live a modest lifestyle.
The purpose of an Income Protection policy is that should you suffer an accident or illness, your lifestyle will not suffer
Looking to learn more?Feel free to visit our in-depth guide explaining how much Income Protection you may need.
How emero can help you get Income Protection Insurance
Calculate the cover required
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At emero, we have access to all of Ireland’s largest life insurance companies. This gives us the ability to compare the entire market and allows you to ensure you get the best possible quote.
Protect your Income
At emero, we have access to all of Ireland’s largest life insurance companies. This gives us the ability to compare the entire market and allows you to ensure you get the best possible quote.
Did you know?
Income Protection policies are eligible for tax-relief
The above is based on an individual in the 40% income tax bracket.
We pride ourselves on supporting our clients by providing comprehensive guides on various types of cover.
You are welcome to check out the information below.
Last Update: May 2023
Income Protection is a policy designed to help cover your bills should you need to take time off work due to illness or injury.
Although it is a policy you hope you will never have to use, deciding to take out a policy may prove crucial.
Most of us are unlikely to be able to survive without our income. Between a mortgage, car payments, rent or even general or day-to-day living expenses. These all become difficult without an income.
Although most employers will cover a small number of sick days, once this is finished you will be dependent on the government’s €208 illness benefit. That is €29 per day.
What is a deferred period?
A deferred period is a fixed period of time that must pass before your monthly payout begins.
This will be agreed at the start of your policy and there are various options available.
Deferred periods start at 4 weeks and run all the way to 52 weeks.
|Deferred Period Options|
The deferred period offered will also depend on the insurance company. Some offer a shorter period. Most clients choose either a 13- or 26-week deferred period.
The length of the deferred period will directly affect the premium.
A shorter period will lead to an increase in premium.
Why do I need Income Protection insurance?
Living without an income would be difficult. Even with substantial savings built up, they would likely dwindle quite quickly.
Hypothetical, but relatable situations are often useful in these cases. We had a client recently who got sick and contacted us regarding his Income Protection policy.
Client A had covered 60% of their €55,000 salary through an Income Protection policy.
Therefore, they were able to activate his claim and save a lot of unnecessary stress and financial heartache. We have broken down the numbers below:
Total claim per year
Plus State Illness Benefits
€43,556 per annum
Having the policy in place meant Client A was entitled to €43,556 including his State illness benefits.
The State illness benefit is €208 per week. With Income Protection in place Client A was entitled to €837 per week.
The above illustrates the difference between some forward thinking and ensuring you have the correct policy in place.
Situations where Income Protection Insurance is a good idea
It is worth mentioning that not getting income is rarely a good idea. However, there are some who may be covered through their employment.
Should you leave that employment is sure your next employer offers it as part of your benefits package. If not, it is time to contact your broker.
If you find yourself in any of the below situations, Income Protection is particularly important.
- A company director
- A self employed person
- Any employee who is not entitled to sick days. For most private sector workers, this is you
- A homeowner
- Someone renting a house or apartment
- A person with a young family
- Anyone who does not have sufficient assets to replace the lost income and cover ongoing expenses
If you are covered as part of your employment, be sure to check your contract as to exactly how many days.
Irish Health Statistics
Looking at the health statistics in Ireland only reinforces the need to have some protection in place.
It is only human nature that we think we are bulletproof or that it won’t happen to us. Unfortunately, this is not the case.
The Covid-19 pandemic reminded us that anyone can become ill. Therefore, having a safeguard in place is important.
Below we look at some risk calculations using a free tool provided by Aviva. We used the following details:
Risk - Case Study
Below are the risks to a 35-year-old non-smoker
There is a 48% risk they may be unable to work for a month or more at some stage.
There is also a 16% chance of suffering a serious illness and a 5% chance of death before age 65.
Some of our trusts clients
The purpose of showing these statistics is not to be morbid or use scare tactics, it is simply to show this is a reality for many people.
Having a policy like Income Protection in place can be invaluable should something happen to you.
When should you think about buying Income Protection insurance?
There are certain events or milestones in our life where our circumstances change drastically. When it comes to needing Income Protection these situations include:
- Buying a house
- Having a baby
- Changing job (perhaps your previous employment included such benefits)
- Becoming self employed
Any of the above may prompt you to take out an Income Protection policy.
Often there are many variables that need to be considered. Therefore, ensure you enlist the help of a Financial Broker who can assist you and scan the market for the most suitable policy.
What are the top illnesses people claim Income Protection Insurance for?
There are certain illnesses or injuries that are more common to cause people claiming on their Income Protection policy.
On average, the top 5 reasons for claiming Income Protection are:
What companies offer Income Protection Insurance in Ireland?
In Ireland, there are five main life insurance companies, all of which offer Income Protection policies. These life insurances companies are:
- Royal London
- Irish Life
- New Ireland
Each company will have a slightly different offering and benefits within the product they offer.
Max Age at Entry
Max Term Age
Max Sum Assured
4,8,13,26 or 52 weeks
4,8,13,26 or 52 weeks
4,8,13,26 or 52 weeks
13,26 or 52 weeks
8,13,26 or 52 weeks
How much does Income Protection insurance cost?
This will be directly related to your occupation. As we discussed already, occupations are broken down into classes 1 to 4.
There are other factors that will affect cost such as:
- Age – The older you are, the higher the premium. Should you choose the reviewable over a guaranteed plan, they will continue to rise as you get older. With the reviewable option, the insurer has the right to change the premium cost over time. On a guaranteed option, the premiums remain fixed over the lifetime of the policy.
- Smoking status – If you are a smoker or have smoked within the previous 12 months, your premiums will be higher.
- Medical history – The life insurance company will require a medical questionnaire to be completed. Questions will differ slightly from company to company.
- Cover needed – Your income and the percentage of the income you choose to cover will impact the premiums. Should you choose to cover 50% rather than 75 then this will be cheaper.
- Your Job – A job that is considered low risk and in class 1 or 2 will be far cheaper than those in class 3 or 4.
- Deferred period – The shorter the deferred period, the higher the premium. Most policies start at 13 or 26 weeks but some insurance companies offer 8 and 4 weeks.
- Renewable vs guaranteed premiums – You may initially pay more on premiums for a guaranteed policy but you have peace of mind that your premiums will not increase over time.
- Indexation – This option allows your policy to increase by approximately 3% each year to keep in line with inflation.
As we see from the above, there are many factors to be considered with an Income Protection policy.
There is no one-size-fits-all policy. There is also the fact that insurers will ask different medical questions and consider jobs in different classes.
This is where having a broker is vital. They can discuss your specific circumstances and find the most suitable policy for your needs.
Is Income Protection tax deductible?
Yes. You will be eligible to claim tax relief on premiums for your Income Protection policy at your marginal rate.
Whether you are self-employed, a PAYE worker or a company director, you are eligible to take out Income Protection and receive tax relief on premiums paid at your highest rate of tax.
This may be 20% or 40% depending on your income.
This tax relief can dramatically reduce the overall net cost of your policy. Below we look at a real life example of how income protection tax relief works.
Name – Brian
Age – 33
Salary – €65,000
Occupation – Accountant (Class 1)
Deferred Period – 13 weeks
Retirement Age – 65
Percentage Insured (60%)
Plus State Illness Benefit
Monthly Premiums (Guaranteed Policy)
Net Cost after Tax Relief
The above illustrates how an income protection policy may be calculated. It also shows how much of an effect the tax relief may have.
If you pay tax at the higher rate you can drastically reduce your premiums. In the above example, for approximately €2 per day you can secure 60% of your income and give yourself peace of mind
How much Income Protection was paid out in 2021?
It may be worth first clearing up the misconceptions around claims and that some are not paid out. Over 90% of claims are paid out by Irish insurance companies.
In the rare case a claim is refused, it is usually because of two reasons:
- Non-disclosure – This is where someone has not told the truth on their application form.
- Claiming before the deferred period has elapsed.
If you are truthful in your application, you will have nothing to worry about.
Figure 1: Income Protection paid out in 2021
Claim statistics by Life Insurance companies
Below we look at a breakdown by company of both amount paid out and the claim percentages in 2021.
Amount paid in claims in 2021
Percentage of claims paid in 2021
|Friends First (Aviva)||€42 million||92%|
It is worth noting that Zurich only entered the market with an offering in late 2021 and therefore we do not have statistics on their behalf.
Are there different types of Income Protection policies?
There are different types of Income Protection available. Your needs and specific circumstances will determine what policy suits you best.
Price is important, but when choosing an income protection policy, it should not be the only factor. Finding the correct policy most suitable to you should be the main goal.
Guaranteed Income Protection
A guaranteed income protection policy offers you the stability and peace of mind that your premiums will remain at a certain level throughout your policy.
The initial premium will be higher. However, this is worth it for many to know there will be no sudden increases.
Reviewable Income Protection
With a reviewable income protection policy, your premiums may fluctuate over time. Your insurer may review premiums considering factors such as age and decide to increase the premium in some cases.
This type of policy lacks the stability offered with a guaranteed policy. Although you may save on your premiums initially, you risk paying more over the long term.
For those who are risk-averse, a guaranteed policy would be more suitable.
It is advisable to discuss all potential options with your broker before taking out either type of policy.
What does Income Protection cover?
Income Protection will pay you a monthly benefit should you be unable to do your job due to any illness or injury.
Benefits will be paid after you have been unable to work for a certain period of time. This is referred to as the deferred period. The deferred period will be agreed upon at the outset of your policy.
Figure 1: Income protection covers sickness, injury & disbability but not redudancy
What does Income Protection not cover?
Income protection does not cover redundancy. It is a policy that is in place to help should you be unable to work due to illness, injury, or disability.
If you are unsure as to what exactly is covered or not covered under an Income Protection policy, feel free to contact our team. We would be happy to answer any questions you may have.
Does Income Protection cover mental health?
Yes. In fact, it was one of the most common reasons for claiming in 2021. The Covid-19 pandemic has put a lot of additional stress on people in both their personal and business lives.
If we look at the Aviva 2021 claim statistics, we can see that Psychological makes up approximately 25% of claims.
Reason for claim
Percentage of total claims
Other medical conditions
These claim statistics may differ with different life insurance companies. However, it does give us a rough idea of the overall picture.
Mental health and psychological issues are behind a large number of claims.
How do I make an Income Protection claim?
Should you become unable to work due to sickness, injury or disability, contact whoever who took the policy out with.
Whether that be a broker like ourselves or through your employer, it is important to let the relevant parties know.
This way your policy can be examined and the process can be started. Depending on your deferred period, there will be a certain amount of time that will have to elapse before your benefits will start.
Liaise with the relevant parties to ensure that the benefits are paid once this deferred period has passed.
How long can I claim Income Protection for?
Income Protection will continue to pay you a regular income until you are able to return to work or until the end of your policy term (usually the same as your retirement age i.e. 66).
However, there are other supports available as well as the financial aspect. Many of these are to help you get back to being in a position to work.
Some of these benefits include:
- Rehabilitation benefit – This will give you the opportunity to avail of a tailored rehabilitation programme with appropriate exercises.
For some, having access to this recovery programme may facilitate the opportunity of a new career path. The objective is to help you return to carrying out your normal day-to-day activities as much as possible.
- Relapse benefit – Should you attempt to return to work but relapse with the same illness, you claim will restart immediately.
There will be no deferred period in this case.
- Partial benefit – If you can return to work whether that be full time or part-time, and your earnings are less than they were before you may be eligible for income partial benefit.
If eligible, this will apply whether you return to the same job you held previously or a new career.
- Hospital cash benefit – In some cases you may be eligible for a daily replacement income should you be in hospital for more than seven days.
It is worth noting that the above will differ depending on which life insurance company your policy is with.
It is important to read the fine print and know exactly what you are or are not covered for.
What happens if I change job?
Should you have Income Protection insurance and decide to change jobs, your policy will continue. This remains the case even where you transfer to a job with a higher risk.
It is worth noting your income should you change jobs. If it increases, you may need to increase your cover.
The above is with regard to personal Income Protection policies.
If you are part of a group Income Protection scheme and change jobs, you will lose your benefits.
Should I choose Income Protection or Specified Serious Illness Cover?
Income protection and specified serious illness are two different products designed in different ways.
Specified serious illness will pay out a lump sum in the event you are diagnosed with an illness specified in your policy terms. For this reason it can cause potential issues as you may be unable to work due to an illness outside of the agreed policy terms.
Whereas Income Protection insurance pays you a monthly benefit should you be unable to work due to any sickness, injury or disability.
Income protection insurance will also continue to pay out until you are fit to return to work. Income Protection insurance has many benefits, to discuss your options in more detail, contact our team.
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Income Protection Insurance FAQ's
Nothing. Income Protection and Salary Protection are identical. They both offer the same service and allow you to cover up to 75% of your salary.
As in the case of some financial products, they are referred to in different terms.
Both Income Protection and Salary Protection will pay out should you be unable to work due to illness, injury, or disability.
Yes. In some cases, it may be advisable to increase your level of cover. Events in your life may require an increase in cover.
Significant events that may require you to potentially change your policy include:
- Becoming a parent
- Getting married or entering a civil partnership
- Receiving a promotion or pay increase
- Purchasing a new home or remortgaging your property.
In certain cases, the Life Insurance providers will offer additional benefits regarding the ability to increase your cover.
For example, Aviva offers a ‘Guaranteed Increase Option’. This option allows you to increase your cover by up to 20% and is offered every three years without additional underwriting.
Yes. How it is treated will depend on the type of policy you have. If you have Personal Income Protection where you pay the premiums yourself, you will be entitled to tax relief at your marginal tax rate. This will be either 20% or 40%.
With Executive Income Protection, the premiums are paid by the company. From here they qualify as a business expense and can be offset against corporation tax.
In the event of a claim, the benefits are paid to the employer who passes them to the employee. Relevant taxation deductions will apply.
- To qualify for Income Protection insurance, you must satisfy the following conditions:
Be employed for a minimum of 16 hours per week, or
- Be self employed
There are also other restrictions regarding age limits. These will differ depending on the provider but you must be over the age of 18 and a limit of age 70 with certain providers.
Once you pay income tax, you will be eligible for tax relief. Revenue will need to be contacted to adjust your tax credits. This can be done online via the Permanent Health Benefits page on the Revenue website.
From here follow the below steps:
- Sign into myAccount
- Click on ‘manage your tax’
- Select ‘claim tax credits’
- Select ‘health’ and ‘Income Continuance’
From here your tax credits and relief will be adjusted.
Yes. As your Income Protection benefit provides you with a replacement income, it will be subject to tax.
Your benefit will be paid after tax, USC, and other relevant deductions.
The maximum percentage of income you can insure is 75%.
However, there is also a monetary threshold. These thresholds vary depending on the provider.
Max Sum Assured
Income Protection will be paid until either one of the below events occurs.
- You are able to return to work
- You reach the retirement age outlined in your policy.
This means Income Protection claims can often be paid out long-term. The average claim length is five years but in some cases claims are paid for 20+ years.
No. Income Protection only applies when you are unable to work due to sickness, injury, or disability.
Yes. It is possible to make multiple claims on the same policy.
Yes. However, Income Protection benefits are capped at 75% of your income regardless of how many policies you have.
In most cases you will not be covered for pre-existing medical conditions. These conditions will be excluded from your policy.
On average, Life Insurance companies pay out over 90% of claims. The 10% that are not paid are usually due to two reasons:
- Non-disclosure – This means you have lied on the application.
- Claiming at the end of the agreed deferred period and going back to working before that period ends.
Essentially, if all is above board you are in no danger of not receiving your benefits should you need to claim.
Unfortunately, if you lose your job your Income Protection policy will cease.
An indexation option allows your cover to increase annually in line with inflation. In many cases, your policy premiums may increase by 3.5% annually for a 3% increase in cover.
If you change jobs it is important to let your broker or insurer know. In certain cases it may not affect your premiums as the occupation classes may be the same.
However, in some cases a change in job may affect your policy. It is important you are still covered in the event of a claim. Therefore, be sure to inform your insurer of any occupational changes.
Yes. emero is authorised and regulated by the Central Bank of Ireland.
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