Following a decade of boom time spending, consumers in Ireland are no longer splashing the cash with very few who would rather spend for today than save for tomorrow. Instead we are rapidly becoming a nation of savvy savers. This dash to save has undoubtedly been fuelled by the onset of what has been described as one of the worst recessions the country has ever seen. With very few financially prepared for this and even fewer with any savings to cope, building up the ‘rainy day fund’ is now key. But there are some eventualities that this fund just won’t take care of- there are some that are simply impossible to save for.

Statistics show that a 30 year old person is more likely to be off work due to an illness or injury for a long period than to die before they reach the age of 65. In such an unfortunate event they would still be burdened with all of their regular bills, mortgage payments, loan payments and general living expenses but alongside this they would have to cope with additional medical costs. Could you maintain the same living standard under these circumstances while out of work? It would be fair to say that for the majority, quality of life would be significantly compromised. If you are one of these people then income protection could be for you!

What is income protection?

Income protection provides you with a regular income which is paid out if you cannot work due to an illness or injury. It is designed to replace some of your earned income if you can no longer earn an income yourself thereby ensuring that you can maintain a very similar standard of living. This cover is a practical, flexible option to suit each person’s individual needs. 

ü It provides cover that is specific to your level of income.

ü It offers a top up option in the event that your income should increase in the future.

ü It let’s you decide the deferred period (13,26 or 52 weeks) i.e. the continuous time you need to be off work before the benefit is paid thus accounting for any period of time your employer will continue to pay you for.

ü And the best bit is that it’s affordable!!!!

Meet Tom Murphy, a 35 year old office worker married with one child. He earns €50,000 p.a. His wife is a homemaker and he has no other form of income. For Tom the maximum allowable sum to be paid out in the event of illness or injury is calculated as {(€50,000 x 75%) - State Benefit (€19026.80) = €18473.20. Assuming that he chooses a 26 week deferred period, his gross monthly premium is just €31.85.

But that’s not all…..

Under current tax law (May 2009) Tom is entitled to claim tax relief on the premiums he pays at his marginal rate of tax.

So, how much does Tom actually pay??

The cost to Tom on a monthly basis is just €18.79- just €18.79 to provide piece of mind that he and his family can at least enjoy a comfortable standard of living should illness or injury occur.

But will Irish Life pay out??

Yes. Irish Life is the largest provider of Income Protection in Ireland with over 275,000 people insured. Most importantly more than 90% of claims they have received have been paid!

Income Protection Claims 2008

Of the 3,139 claims paid out during 2008 by Irish Life you can see that the average age of a claimant was just 52. If we take the above example and assume that Tom at aged 52 was unable to return to work before retirement (age 65), the total amount payable to Tom during this 13 year period at €18,473 p.a. would be over €240,000. As the sole income earner of the household with a wife and child to support, on an income of just €50,000 it is unlikely that by age 52 Tom will have saved anywhere close to the €240,000 paid out by Irish Life. 

What’s more is that the income protection product allows for a wide range of conditions. You will see below the distribution of Irish Life’s 3,139 claims during 2008 

If you are going to spend money on protection products, to protect you, your family and your future, you should direct it towards products that will protect you from the events that you could never allow for-those that you could never possibly save for. Employers are not obliged to pay for sick leave. Social welfare payments are minimal. So unless you have a large nest egg set aside, coping financially if illness or injury occurs could prove to be a struggle. With Irish Life’s income protection product, you are getting an effective, affordable option offering financial support at a time when you’ll need it most.