Income Protection

This type of insurance pays an income when the policy holder has suffered an accident or sickness. The amount that is claim cannot generally go more than 60% to 65% of that person’s income less state benefit and the policy cannot exceed the state retirement age.

The plan holder has a choice of a select deferred period from when the policy begins to pay – the longer the deferred period the cheaper the monthly premiums will be. The insurance provider cannot cancel the policy regardless of the number of claims are made but could cancel the policy if hobbies or a change in employment significantly increases the risk of a claim.

If the policy holder recovers from the accident or sickness and returns to work at a lower rate of pay due to disability, a proportionate benefit can be paid. Monthly premiums tend to be higher for women due to their higher morbidity rate.

Premiums are higher if you are working in a high-risk occupation:

  • Class 1 – Lowest risk – Accountants, Civil Servants, Clerical and administration roles.
  • Class 2 – Low risk – Hairdressers or Pharmacists.
  • Class 3 – Moderate risk – Farmers or Electricians.
  • Class 4 – Highest risk – Coal miners or Industrial chemists.

Benefits paid out are tax free if taken by an individual but if an employer provides this cover on a group basis the pay-out is usually taxable.

Exclusions from income protection:

  • Self-inflicted injury, alcohol or drug abuse.
  • Pre-existing conditions.
  • Injury arising from a criminal act.
  • Pregnancy and childbirth complications