My Income is the rock on which my Life is built!

I am considering implementing some form of Income Protection plan to compensate me if I am out of work due to illness or injury. Is this a good idea and what are the benefits of having this in place?

Your income is what makes your world go round. It pays the bills, allows you to enjoy your home life, holidays with the kids and provides for a roof over your head.

It may not be a pleasant thought but with the current perilous state of the Government finances, cuts in Government spending are likely to continue for the next few years. It is becoming increasingly obvious that we have to begin to provide for our own ‘rainy day’, as the likelihood of the Government coffers being able to support us is increasingly under strain.

Think or all the items in your life that are based on your ability to work and earn an income – food, car, holidays, socialising, day to day expenses associated with looking after you children, college fees and much more. The list is endless.

If your income suddenly dries up due to illness or injury and you are forced to rely on state benefit payments, you will soon realise your income is your biggest asset and is the source of your ability to enjoy your life.

Most people would not have to think too long or hard to identify a friend, neighbour or family member who was out of work for a considerable period of time due to illness or injury. The chances of you succumbing to a similar event are unfortunately far too common to be completely left to chance.

How common is this event? Somebody who is currently 35 years old has a 1 in 6 chance of being out of work for over 6 months due to illness or injury at some stage during their working life*.

If you are lucky enough to have some part of your income paid by your employer while you are out of work, it may well be that this benefit only lasts for a defined period of time as your employer may not continue to pay you indefinitely. You need to ensure that once this time period has expired you have you own plan in place to provide yourself with an income.

So, what options are available?

Income Protection is available from most Life Companies. Obviously some plans are more comprehensive that others and some are more expensive than others. However, most products do have some common features, such as:

• Tax Relief is available to you on the cost of the cover.
• You may cover up to 75% of your income.
• They will pay you an income if you are out of work due to illness or injury for a defined length of time, typically up to retirement age if you so wish.
• They will provide a vital financial lifeline to you and your family in the event of you being unable to work.

Where you are the main or even part income earner for your family unit, by insuring your income you are also looking after your families financial prosperity.

Income Protection for the Business Owner

If you are self employed the situation may be even far more severe, as you may not even qualify for state benefits. You will be forced to depend on your savings or may have to rely on your business continuing to pay you an income in your absence, even though you are no longer contributing to the success of the business. In the current tough economic environment, you do not want to become another cost to your business.

If you are an employer there may also be substantial costs associated with paying key employees or Directors salaries over a prolonged period of time while they are out of work due to sickness or injury. How long have you committed to, or would be able to continue paying them? 3 months, 6 months, a year?

You can implement an Income Protection plan for your key employees or Directors which takes the burden off of you in having to cover such salaries over a prolonged period of time. Contributions to such a plan may also qualify as an allowable business expenses for tax purposes and have the added advantage of promoting greater loyalty from key employees.

Your biggest financial resource is your ability to work and the income you derive from this. Without the ability to work, your lifestyle would change dramatically.

*Source: Central Statistics Office, 2007