Income Protection for High Earner - use the full 75%?

S

Seaniemed

Registered User
Messages
114
Hi all, I've tried searching through the forum but wasn't able to find anything that answered my query - aimed at those who are high earners.

I am on €265,000 p.a. gross.
Mortgage is €1200.
Monthly expenses approx €2,000
- 2 kids aged 5 and 6 months old
Single income - wife a teacher but resigned

If I was off sick tomorrow I figure I'd need around €4000 net per month to get by - including some savings and buffers.

I am in a position where in most illness cases I would likely be able to return to some sort of high earning work (public sector) with concessions.

I could cover up to 75% of my salary - approx €250 net per month premiums. It just seems like a huge amount of money to get around €100,000 net per year.

My question is how similar posters considered the "unseen" expenses for a lifetime e.g. college, savings, etc if you were on long term illness benefits.
Did anyone decide on lower cover than just 75%?

I appreciate the simple answer is to calculate how much you'd need per month, but surely that amount changes with growing families, and what about trying to allow my family to "live a little" even if I wasn't able to.

Should I just go with 75% of €265,000? What did others do?

Edit - I'm 37 - generally healthy but had back surgery 4 years ago (recovered), will likely end up with longer term back pain regardless of activity level - I do need income protection but unsure of level beyond minimum expenses.
 
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You don’t give specifics such as age and health situation so it’s hard to know if the premiums represent good value or not. My own experience is that these premiums start to rise pretty deeply after the age of about 40.

I have income protection up to 75% of net income index linked. I think that’s about the right balance because if I’m not working some other costs will go down.

Think as well about whether you want it to run all the way to your normal retirement age. There is a very big difference in cost between covering until 62 and covering until 66.

I think, if someone isn’t carefully thinking about all the above lifestyle factors that they’re not really doing it right

In terms of getting best value go to a broker and ensure that you are claiming income tax relief.
 
Are you sure your employer isn't already providing this. I had a conversation with someone who was adamant his employer (Multi National) didn't provide. He contacted HR who confirmed that the did.
 
Dr Strangelove said:
You don’t give specifics such as age and health situation so it’s hard to know if the premiums represent good value or not. My own experience is that these premiums start to rise pretty deeply after the age of about 40.
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Have edited to include
Persia said:
Are you sure your employer isn't already providing this. I had a conversation with someone who was adamant his employer (Multi National) didn't provide. He contacted HR who confirmed that the did.
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I'm HSE so only covered for 6 months.
 
Seaniemed said:
Edit - I'm 37 - generally healthy but had back surgery 4 years ago (recovered), will likely end up with longer term back pain regardless of activity level - I do need income protection but unsure of level beyond minimum expenses.
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Back issues are a very common cause of incapacity to work.

You will have to disclose this when taking policy out and insurer may not pay out as a result.

Seaniemed said:
I'm HSE so only covered for 6 months.
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The rules changed in the last few years so it’s not quite the cliff edge it used to be.
 
Highly likely there would be something like a sacroilliac joint claim exclusion on the policy for a pre-existing back condition. But, you won't know for definite until you submit the application and go through the underwriting process.
 
When I was investigating IP, it was suggested that it would be more efficient/cost effective if my cover only just brought me up to the 40% band. Otherwise you are paying for insurance on something that you may only get approx 50% of the benefits(due to tax). This point doesn't really apply if you NEED more cover than that though.

Obviously all IP payments are taxed as regular income.
 
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