Look after your pay even during times of desolation
-
Ian Kennedy QFA
- March 13, 2023
At emero Insurance, we’re on a mission to demystify the insurance industry.
Therefore, it’s rewarding when publications such as The Sunday Times reach out and ask our opinion on such topics.
Our Director, Alan Hanway provided some insightful comments in a recent publication.
For most of us, our income is our most important asset. It sets the foundation and enables us to pay for our mortgage, rent, childcare, and even other insurance policies.
Our survey highlighted that 95% of respondents would be unable to survive on the State Illness Benefit until retirement age.
Yet many people have not got salary protection in place.
The State Illness Benefit will give you a maximum of €30 per day to live on.
How Income Protection works
Income Protection will pay you up to 75% of your salary on a monthly basis should you be unable to work due to any illness, injury, or disability.
The cover runs until retirement age. You’ll choose a deferred period at the outset of your policy.
This is the period you must wait until your benefits begin to be paid. The longer the deferred period, the cheaper the premium.
“If someone aged 40 with a salary of €60,000 took out cover for €40,000 until age 66 [and claimed for the entirety] that is a liability of over €1 million” Alan Hanway, emero Insurance.
Those in high-risk occupations will either pay higher premiums or not be eligible for cover.
Age will also be a critical factor in determining premiums.
Should you take out the maximum cover?
Although 75% of the salary is the maximum allowable cover, a lower amount may be sufficient in some cases.
Suiting the cover to your budget is also an option. In some cases, 50% of your salary may be enough to cover your mortgage and other living expenses.
“So if you can’t cover yourself for 75 or even 60 percent, there is nothing wrong with having 30 percent covered. If you’re on a salary of €60,000, that’s still €20,000 a year, with the state benefit on top.”
Alan Hanway, emero Insurance
The Self-Employed
As most self-employed people pay class S PRSI, they will unlikely qualify for any state’s illness or disability benefits.
Anyone who is self-employed and cannot work runs the risk of having the income plummet to zero overnight.
You may technically qualify for the invalidity pension, but this isn’t straightforward as there are specific criteria to meet.
However, anyone who is self-employed can pay their Income Protection premiums through the company.
Misconceptions about Income Protection
Income Protection isn’t like other types of insurance policies. If you’ve been truthful at the application stage and are unable to work, once your deferred period passes your benefits will be paid.
Income Protection claim statistics are approximately 90%. The 10% not paid are often down to a non-disclosure during the application process.
There’s also an option to fix your premiums. This means your monthly premium will remain the same throughout your entire policy.
It is also often long-term cover. Your benefits will continue to be paid until you can either return to work or, reach retirement age.
The average Income Protection claim is in excess of five years.
What should I do next?
Your next steps will depend on your specific circumstance.
If you’re an employee, check if your employer has a scheme in place. If you are covered, great!
Others may be entitled to cover for a specific amount of time. For example, you may be paid a percentage of your salary for 6 months.
If this is the case, it may be worth looking at putting Income Protection in place with a 26-week deferred period.
This means you’ll be covered for all eventualities.
If you are self-employed, you’re at risk. It’s time to assess your options and look at getting some level of cover in place.
Even if it’s for a lower amount of salary. Perhaps enough to cover your mortgage and basic living expenses.
emero Insurance - Sunday Times (Interactive Article)
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Client Services Director
Ian is the Client Services Director at emero Insurance and has worked within the financial sector for the past five years. If you would like to chat with Ian directly, please get in touch with him at [email protected]
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