Income Protection, Serious Illness or both?

S

sinbadsailor

Registered User
Messages
240
As a sole ltd company director, working for myself I want to get some protection on income. Are Income protection and Serious Illness too similar to get both or is there merit in having them both?
 
An ideal way from an economic and tax efficency standpoint is to set up a 1 person group PHI scheme.

The Co. can pay premiums, & claim them as a tax deduction against profits. No tax implications for the employee/director.

Treated is exactly the same way as a Co. pension arrangement.

I'm not a huge fan of S.I. policies. Never was. My view is that with properly structured Life cover (your Co. can pay for this on your behalf - called D.I.S.), PHI, and health ins (Vhi etc.) in force (all of which can enjoy tax benefits) is there a real need for it?
 
If you pay Critical Illness through the company, it is tax deductable.

BUT if you then claim, the proceeds are payable to the company, not you, and tax and PRSI will have to be paid on the proceeds when paid out to you. In your position, there is no point in having the proceeds paid to the company.
If you pay through salary deduction, the proceeds are payable, gross, to the employee.

If you take out CI, don't do it through the company. Lightning does strike!
 
Hi

What is the recommended level as a multiple of salary that one should have for serious illness cover?

Thanks


Beldlam
 
sinbadsailor said:
Are Income protection and Serious Illness too similar ...
Click to expand...

They are totally different. In my experience many tied agents don't have access to Income Protection so push Critical Illness as a viable alternative.
 
Income Protection (IP) and Specified Serious Illness (SSI) cover are different in a number of fundamental ways: - (1) SSI pays a lump sum if you are diagnosed with one of a list of specified conditions. If you get a condition that’s on the list, you get a lump sum; if you don’t, you don’t. IP on the other hand pays you an ongoing income if you are unable to work due to ANY illness or accident. There’s no fixed list of qualifying illnesses – if it’s serious enough that in the opinion of your medical doctor and the insurance company’s you’re unable to carry out your own job, it’s likely to be a claim. As such, IP covers you for a far wider range of potential illnesses.

It’s also worth mentioning that IP premiums qualify for tax relief while SSI premiums don’t.

 
Bedlam said:
What is the recommended level as a multiple of salary that one should have for serious illness cover?
Click to expand...

No straight answer to that. If you already have Income Protection and Health Insurance (VHI etc.) then I'd say enough Specified Serious Illness cover to clear off all your debts. If you don't have Income Protection, you should have extra SSI to compensate.
 
I'm just looking into Income Prot and there are two options; guarantteed (everything stays same)and reviewable (price and benefits reviewed every 5yrs)......confused about which is best?
 
If both quotes are Friends First, the difference is that with the reviewable one, you're taking the chance that Friends First may put up the cost of your cover at the review. So it might or might not end up being dearer in the long run, even though the premium is cheaper to start with. There's no way of knowing.

If the guaranteed cover is Friends First and the reviewable one is Irish Life, there are some differences in cover, e.g. Irish Life require you to inform them of changes in occupation and might review or withdraw cover then. Friends First don't.
 
I actually believe that the Irish Life Cover is not directly comparable to the Friends First cover on price alone.

Ask your adviser to point out the salient differences here.
 
RS2K said:
An ideal way from an economic and tax efficency standpoint is to set up a 1 person group PHI scheme.
The Co. can pay premiums, & claim them as a tax deduction against profits. No tax implications for the employee/director.
Treated is exactly the same way as a Co. pension arrangement.
Click to expand...

I was led to believe the PHI premiums are not a valid expense against profits & the employee would have to pay tax on any premiums paid by the company. Can anyone clarify this?
 
You must log in or register to reply here.
Back
Top