Self-Employed Income Protection
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Why is Income Protection important for the Self-Employed?
Being self-employed comes with many perks. However, guaranteed sick pay is not one of them.
As a self-employed person, your income is likely your most important asset. Without an income mortgage, bills and general living expenses may become a struggle.
Becoming self-employed means you will no longer be a PAYE employee and therefore will not be entitled to the State Illness Benefit.
It is for this reason that more and more self-employed people are taking out Income Protection Insurance. It will allow you to receive a monthly benefit should you be unable to work due to any sickness, injury or disability.
Am I entitled to the State Illness Benefit?
No. Those who are self-employed and out of work due to illness or injury do not qualify for the State Illness Benefit.
This could mean having to rely on savings should you be unable to work. Although, even significant savings will reduce quickly if they are being used to supplement not having an income.
An Income Protection policy allows you to protect a percentage of your salary up to a maximum of 75%. This benefit will be paid after the deferral period either until you can return to work or reach the retirement age in your policy.
If you would like to speak to a member of our self-employed Income Protection team you can call us or request a call back.
Benefits of Income Protection for the Self-Employed
Income protection cover is available for everyone, but it is particularly important for self-employed individuals.
Tax-Relief
Fixed Premiums
Covers Long-Term Illness
All Illnesses Included
Did you know – Income Protection will pay out continuously until you are in a position to work.
1. Tax relief on contributions
You will receive contributions at your marginal tax rate. For example, if your premium is €150 it will in fact only cost €90 assuming you are in the 40% income bracket. This means in this example you could protect a percentage of your income for as little as €22.50 per week.
2. Fixed premiums
Should you choose guaranteed income protection, which we would recommend, your premiums will remain fixed. Guaranteed income protection premiums will be more expensive than reviewable but are worthwhile in the long run.
3. Covers long-term illness
Having an income protection policy in place will cover you as long as you are unable to work. In some circumstances, this may be years rather than months. Your full benefits will continue to be paid until you can safely return to work.
4. All illnesses are included
Whereas some protection policies only pay benefits if diagnosed with a specific illness, income protection will pay out if you are diagnosed with any illness once it is preventing you from completing your occupation.
Professions where Income Protection is most popular
Income Protection Insurance is particularly popular among certain sectors, industries, and occupations. These include:
How much does Income Protection cover cost?
Below we look at examples of the cost of income protection for occupations that are often self-employed or contractors.
We will assume all examples would like to protect 75% of their income which is the maximum allowable.
Age | Occupation | Class (1-4) | Salary | Premium (after tax relief) |
35 | IT Consultant | 1 | €70,000 | €40.02 |
35 | Dentist | 2 | €70,000 | €55.29 |
40 | IT Consultant | 1 | €70,000 | €52.09 |
40 | Dentist | 2 | €70,000 | €72.19 |
Assumptions
- Non-smoker
- Deferred period of 26 weeks
- Retirement age 65
- Chose guaranteed Income Protection
Assumptions:
- Non-smoker
- Deferred period of 26 weeks
- Retirement age 65
- chose guaranteed income protection
It is worth noting that smoking can have a significant impact on your premiums. In some cases they may increase by up to 50%.
Did you know?
Income Protection policies are eligible for tax-relief
The above is based on an individual in the 40% income tax bracket.
What are the chances of you becoming unable to work?
Many of us can fall into the trap of thinking we’re unlikely to ever fall sick. Although a global pandemic did illustrate how quickly things can change.
At this point is it worth looking at the statistics showing the chances of you becoming unable to work for 1 months or more due to illness or disability.
Age/Gender | Smoker | Non Smoker |
30-year-old male | 43% | 34% |
30-year-old female | 52% | 43% |
40-year-old male | 39% | 31% |
40-year-old female | 48% | 39% |
As you get older, these percentages increase. The purpose of showing these results is not to scaremonger. It is simply to highlight the importance of your income and discuss why it should be protected.
How emero can help you get Self-Employed Income Protection
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Most popular industries for Income Protection
Self-employed professions lend themselves towards income protection. Some of the most popular occupations to take out income protection are:
Class 1 | Class 2 |
Accountants | Barber |
Architects | Car Salesperson |
Building Surveyor | Foreperson (no manual work) |
Business Analyst | Chef |
Doctors | Health and Safety Officer |
Dentist | Hotel Owner |
IT Professionals | Physiotherapist |
Solicitors/Barristers | Restaurant Owner |
If you are unsure what class your occupation falls under, feel free to contact our team. We can answer any questions you may have and see if there is an option to put the cover in place.
Income Protection Classes 📌
Your occupation will also have a significant impact on your eligibility. Each occupation is given a rating from Class 1-4. Learn More
Self-Employed Income Protection - FAQ's
Income Protection is particularly important to self-employed individuals as they are not entitled to the State Illness Benefit. This means you will have no income should you be unable to work due to sickness, injury or disability.
This can be difficult to answer as it varies from person to person. Although whatever your line of work, it is likely that it will be dramatically impacted should you suffer a significant injury or become ill.
You can cover up to a maximum of 75% of your income. However, in many circumstances, covering a lower percentage of your income may be sufficient. If you are unsure how much cover you need, it may be worth contacting our team to assess your options.
The cost of your premiums will depend on several factors, the main aspect being your occupation. Insurers will base your premium on the following:
- Your occupation and the level of risk involved with carrying out your job on a day-to-day basis.
- Your age. The older you are the higher your premiums are likely to be.
- Any pre-existing medical conditions.
- Your chosen deferred period. This is the period of time between when you are unable to work and when your benefits begin to be paid. This ranges from 4,8,13,26,52 weeks. The shorter the deferred period, the more expensive your premiums will be.
- Sum assured. Your income and the percentage of that income you would like to protect will directly impact your premiums.
- Smoking status. If you have smoked in the previous 12 months, this will increase your premiums.
There are 4 income protection classes. These range from class 1 which is seen as the lowest risk occupation up to class 4 which is seen as the highest risk.
An example of a class 1 occupation is an IT Consultant whereas a class 4 example is a Mechanic. There are also several occupations that will be automatically declined.
Below are some of Aviva’s recent facts and figures for Income Protection.
- Approximately €45 million is paid out annually to income protection recipients.
- 92% of all income protection claims were paid out.
