What is income protection?

19th June 2020

Income protection provides you with a regular income, which is paid out if you cannot work due to medium or long-term illness or injury. It is designed to supplement some of your earned income if, due to illness or injury, you cannot earn an income yourself. Income protection is available to those in full-time employment or the selfemployed.

It protects you if you are out of work for long periods due to illness or disability; it does not cover you in the event of being made redundant. To qualify for income protection cover you must typically work at least 16 hours per week. Some occupations are not covered for income protection and if you have a significant medical condition you may not be able to get income protection cover.

In order to ensure you have a financial incentive to return to work, income protection cover is usually limited to 75% of your pre-illness earnings, less the single person’s Social Welfare Disability Benefit. You cannot insure 100% of your earned income and high earning restrictions may also apply.

The cover pays out if you are out of work for longer than a period referred to as the “deferred period”, which typically ranges from 8 to 52 weeks. The cover normally pays out this benefit after the deferred period while you continue to meet the conditions of payment, until the earlier of:

  • The date the insurer determines you are fit to return to work; in some cases the insurer may be willing to continue paying a partial benefit for a period if you return to work part time.
  • The date you return to work.
  • The benefit termination age of the cover, which is usually 60 or 65. This can be earlier in some cases but can be no later than your planned retirement date.

You should talk to your Financial Broker about income protection cover and whether it is something you should consider.