Income protection - can you help me get my head around it?

T

talkdtalk

Guest
I am a bit confused by Income protection, and would be grateful for some help -

Take an individual with an income of €45,OOO per year (pre tax)
Income protection max is 75% = €33,750
Sate benefit = (approx) 9,000
That leaves €24750

So insurance company benefit to be paid is €475.96.

Am I correct in thinking that there is then tax to be paid out of this 475.96??

Does this leave a very small income?
Is income protection enough to have?
 
tax to be paid on the entire!

It might not seem a great amount, but its a damn sight better to have it than not to. On your figures, your income would be down about 50% which is better than being down 80% if all you had was teh social welfare. Also, are you factoring in that the 'high' SW benefit is only paid for 12 months, after which you are down to the lowest figure.
 
Also factor in that most income protection policies have a waiver of premium benefit built in, which means you won't have to pay the monthly premium whilst you are claiming the benefit. I have processed IP claims on behalf of clients and whilst those that are currently on benefit aren't exactly living high on the hog, most would really struggle without it.


www.powerinsurances.ie
 
In the above example you should have a total of 75% of pre-disability income while in a claim. Yes it will be taxed, but so is your income. Tax credits should see to it that your 75% is taxed slightly less than your full income. So you'll have a little over 75% of your current take home pay.

The idea of the 75% rule is to reduce the risk of people being incentivised to stay on a claim when they are capable of returning to work.
 
As a slight aside but related nonetheless; have Income Protection rates increased in the last 6-12 months given the changing status of the economy?

I realise that Income Protection is NOT redundancy protection so technically there should be no change, but just wondering.
 
efm said:
As a slight aside but related nonetheless; have Income Protection rates increased in the last 6-12 months given the changing status of the economy?

I realise that Income Protection is NOT redundancy protection so technically there should be no change, but just wondering.
Click to expand...

They have remained more or less the same.

Redundancy cover is a whole different ball game, expect big increases on this.
 
You must log in or register to reply here.
Back
Top