Oscar Wilde once said ‘It is better to have a permanent income than to be fascinating’. That begs the question, what is a permanent income and just how permanent is it?
A 2016 survey by Irish Life found that half of Irish households had rainy day savings averaging €32,000. On the face of it this may seem like a tidy sum and one that can be leaned on to get you though a hard patch, but that would be on the basis of a number of assumptions. That the ‘patch’ of time period is known. That a disruption to your income, be it through illness or redundancy for example, was short-lived. That a surgery, if required, would be affordable, and if you have health cover in place, that you could balance all of your outgoings while all these events are taking place, often at the same time!
In terms of these life events and financial costs mentioned above the majority of Irish society depend on their ongoing salary, or their income, to fund these responsibilities. This is where having your income protected becomes a vital part of you and your family’s life planning and if you are a one-income household this type of cover is heightened in importance all the more.
The current state invalidity benefit is €208.50 per week or €10,842 per annum, when you consider that the average full-time salary in Ireland currently stands at €49,000 this represents a 78% fall in income. This is a dramatic fall in living standards and can be compensated through having income protection.
Does Income Protection begin immediately?
The majority of policy types only pay out after the policy holder has been out of work for either 13 or 26 weeks. There is however one scheme that operates from day one that we can discuss with you. A policy that does not start issuing a payment until week 26 will understandably be less expensive than a policy that begins issuing a payment after 13 weeks so a decision will need to be made in this regard.
Don’t let this decision be taxing
In similar manner to pension contributions, tax relief can be claimed at your marginal rate of tax on premiums paid which is an added bonus to consider.
What does Income Protection Cover?
Cover can be far-reaching in terms of scope and generally takes account of any illness, injury or disability which prevents you from working (pre-existing conditions may be excluded). You can make multiple claims and the plan remains unaffected. Importantly, stress and back problems are covered which are the main causes behind claims.
So back to our questions, what is a permanent income and just how permanent is it?
It’s an income that’s protected.
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