Public Sector Income Protection

"Income Protection specifically tailored to coincide with your Superannuation sick pay entitlements"

Public Sector Income Protection

"Income Protection specifically tailored to coincide with your Superannuation sick pay entitlements"

What is Income Protection?

Income protection is an insurance policy that pays a replacement income on a monthly basis for a specific period of time (usually retirement age) in the event of the policyholder being unable to work due to illness or injury.

The replacement income starts paying out after a certain period of time. This is called the deferred period. This is usually 26 weeks for public servants when their sick pay entitlements cease.

An Annual income can be insured ranging from €10000 per annum (minimum) to a maximum of 75% of your salary.

This Annual income is insured from the start date of the policy to a chosen term (usually the policy holders retirement age).

When on claim, this sum of money is paid on a monthly basis until you either return to work when fit or the chosen term of the policy’s (usually 60th/65th birthday of policyholder).

What is Income Protection?

Income protection is an insurance policy that pays a replacement income on a monthly basis for a specific period of time (usually retirement age) in the event of the policyholder being unable to work due to illness or injury.

The replacement income starts paying out after a certain period of time. This is called the deferred period. This is usually 26 weeks for public servants when their sick pay entitlements cease.

An Annual income can be insured ranging from €10000 per annum (minimum) to a maximum of 75% of your salary.

This Annual income is insured from the start date of the policy to a chosen term (usually the policy holders retirement age).

When on claim, this sum of money is paid on a monthly basis until you either return to work when fit or the chosen term of the policy’s (usually 60th/65th birthday of policyholder).

How Does Income Protection Work?

You are required to choose the following:

A sum of money to insure (min 10k/max 75% of salary).
The term you wish to be covered for (usually your 60th/65th birthday).
The number of weeks that you need to be off work before the policy starts paying out (usually 26 weeks). This is called the deferred period.

Please note the decisions made from the points above will have a direct correlation with the premiums of the policy.

For example some individuals might want to cover themselves for the maximum of 75% of their salary payable after 13 weeks when off work and payable until they retire @65 while others might only wish to cover enough funds to cover their mortgage repayments and monthly bill until the mortgage is paid off @60.

Another factor which effects the premium is your occupation. Some occupation due to the nature of their work are more prone to illness/injury (Construction workers) and are more expensive that say Office/Admin workers etc. Occuptions are rated from Class 1/2/3/4 with 4 being the most expensive.

How Does Income Protection Work?

You are required to choose the following:

A sum of money to insure (min 10k/max 75% of salary).
The term you wish to be covered for (usually your 60th/65th birthday).
The number of weeks that you need to be off work before the policy starts paying out (usually 26 weeks). This is called the deferred period.

Please note the decisions made from the points above will have a direct correlation with the premiums of the policy.

For example some individuals might want to cover themselves for the maximum of 75% of their salary payable after 13 weeks when off work and payable until they retire @65 while others might only wish to cover enough funds to cover their mortgage repayments and monthly bill until the mortgage is paid off @60.

Another factor which effects the premium is your occupation. Some occupation due to the nature of their work are more prone to illness/injury (Construction workers) and are more expensive that say Office/Admin workers etc. Occuptions are rated from Class 1/2/3/4 with 4 being the most expensive.

Why is Income Protection so important for Public Servants

The biggest risk to most Public Servants financial security is the risk of them becoming ill or unable to work and earn an income.

Why? The Benefits and Entitlement of public sector superannuation scheme automatically cover all public servants for:

Their retirement as it pays a lump sum and a pension on retirement.
Their untimely death with the Death-in-service benefit (1.5 to 2 times Final salary on death) and 50% of pension entitlement payable to the surviving spouse.

Although all public servants have sick pay entitlements, the majority of these benefits run out after 12 months.

What would happen if you got sick at a relatively young age and were unable to work for the rest of you life? Who would pay for your lifestyle/your bills/your mortgage??

This is why income protection is an integral part of most public servants financial planning and up to 80% have this cover.

Your income is your most important asset? You insure assets like your car/your house etc every year…… why not insure the asset that pays the premiums for all other assets/liabilities as well as your lifestyle??

It is always recommended that all public sector employees take out an Income Protection policy that coincides with the sick pay entitlements mentioned above. This will ensure that your income is protected in the unfortunate event of you getting diagnosed with an illness or injury that prohibits you from earning an income for a long term period.

Why is Income Protection so important for Public Servants

The biggest risk to most Public Servants financial security is the risk of them becoming ill or unable to work and earn an income.

Why? The Benefits and Entitlement of public sector superannuation scheme automatically cover all public servants for:

Their retirement as it pays a lump sum and a pension on retirement.
Their untimely death with the Death-in-service benefit (1.5 to 2 times Final salary on death) and 50% of pension entitlement payable to the surviving spouse.

Although all public servants have sick pay entitlements, the majority of these benefits run out after 12 months.

What would happen if you got sick at a relatively young age and were unable to work for the rest of you life? Who would pay for your lifestyle/your bills/your mortgage??

This is why income protection is an integral part of most public servants financial planning and up to 80% have this cover.

Your income is your most important asset? You insure assets like your car/your house etc every year…… why not insure the asset that pays the premiums for all other assets/liabilities as well as your lifestyle??

It is always recommended that all public sector employees take out an Income Protection policy that coincides with the sick pay entitlements mentioned above. This will ensure that your income is protected in the unfortunate event of you getting diagnosed with an illness or injury that prohibits you from earning an income for a long term period.

When is Income Protection most important?

Income protection is most important when you are young. If you are unable to work for a long term period or are diagnosed with a serious illness at a relatively young age, your ill health Early retirement pension entitlement will be very too small to live off for the rest of your life. In this situation, income protection will ensure that you get 75% of your salary until your 60 th /65 th birthday, whichever age you choose. It will allow you to be able to pay your bills and have a decent standard of living.

When is Income Protection most Important?

Income protection is most important when you are young. If you are unable to work for a long term period or are diagnosed with a serious illness at a relatively young age, your ill health Early retirement pension entitlement will be very too small to live off for the rest of your life. In this situation, income protection will ensure that you get 75% of your salary until your 60th / 65th birthday, whichever age you choose. It will allow you to be able to pay your bills and have a decent standard of living.

What Illnesses to Income Protection Cover

Income protection contrasts highly to any other type of cover when comparing the conditions that the policyholder can claim on. For example, a serious illness policy will only pay out on a serious illness (Cancer/Cardiac arrest/MS/Parkinson etc). It may in fact only pay out partially for certain cancers/heart conditions etc.

Income protection pays out on all illness and injuries. It cover stress related illnesses, any injuries that restrict the policy holder from working (Knee/back injury, injuries sustained in an accident that are not classed as a ‘serious illness’ etc).

It basically pays out any condition that your doctor will confirm in writing that you are unfit/unable to perform their day to day tasks associated with your job.

Premiums And Tax Relief

A huge benefit with income protection as opposed to any other protection policies (life cover/Personal Accident cover/Serious illness cover) is that the monthly premiums qualify for tax relief. So for example if you are earning over €36800 per year you are usually paying income tax @40%. In this situation, you would be due a tax rebate of 40% of the income protection premium. For example if, say the premium is €100, you would be due back €40 as a tax rebate each month.

How the tax relief works:

The Gross premium is debited from your bank account each month. The tax rebate is added back to your take home pay on your payslip on a monthly basis.

Once the policy goes live, the relevant insurance provider send a certificate to the revenue to prove that your policy is now live and this cert instructs them to alter your tax credits accordingly. When this is complete you will receive the relevant tax rebate back in your tax home pay on a monthly basis. You will in effect notice an increase in your take home pay by the rebate amount once the revenue alters your tax credits.

Please note that it may take 6 week or so after your start date before you start receiving your rebate but all tax relief will be backdated and paid in full once your tax credits are adjusted etc.

What Insurance Companies Provide Income Protection for Public Servants?

Most of the main insurance companies provide cover income protection cover for public servants (Aviva, Zurich, Irish Life, Royal London, New Ireland). We compare all providers income protection offer for public servants in relation to:

Cheapest premium.
The price discounts available by each company at that particular time.
Additional other free benefits that each provider offer (eg Best Doctors/Family Car and Helping Hand/Hospital cash/return to work rehabilitation etc).

Once we compare all of the above points, we will recommend the most suitable provider with the cheapest premiums for you income protection policy.

Please note that Occupational Classes can differ Between the various Insurance Providers. For example, School Principles/Vice Principals/Nurse Manager/Doctors can be classed differently with certain providers, meaning that one quoted premium with one provider would be significantly lower than another. its important to understand these differentiations before choosing a provider or comparing quotations etc.

Important Terms of Income Protection

This is the amount of time you have to be off work continuously, due to illness or injury, before your income protection benefit starts being paid. This is called the “Deferred Period”. You can choose a deferred period of 4,8,13,26 or 52 weeks. You can match this time to suit your personal circumstances, for example: it could be based on your employer’s sick pay rules, so you would choose your deferred period to match the amount of time your employer will provide sick pay, so as soon as your employer’s sick pay ends your income protection benefit would start. Or it could be driven by cost.

The length of the deferred period you choose will impact the cost of your policy. The longer the deferred period, the lower your monthly premium. For additional flexibility, you can choose two deferred periods within your policy. For example: you can choose to provide a certain amount of income protection benefit after shorter deferred period and a higher income protection benefit amount after a longer deferred period. This may be useful in order to best match employer sick pay scheme or to help reduce the overall cost of cover.

You can claim tax relief on all premiums you pay at your marginal rate of tax, if you currently pay income tax. This means that if you are taxed at the higher rate of 40%, on a €100 premium you will get €40 tax relief – so the net cost to you is only €60. The tax relief has to be claimed from Revenue and we can send the certificate directly to them for you.

While you are in receipt of an income protection benefit payment, you will not have to pay the premium related to that benefit. This is called a waiver of premiums. For example: Mary has a car accident and goes on sick leave from work. Following the selected deferred period, she starts to receive her income protection benefit and she does not need to pay any monthly premium payments. Once well enough to return to work in the future, her cover can resume, along with her premiums, until Mary reaches her selected expiry age.

Inflation impacts the general cost of living, as it means the price of goods and services increase over time. By adding indexation to your policy, your cover increases by 3% each year, in return for a 3.5% increase in your premiums each year (this may differ between insurance companies). In the event of a valid claim, your income protection benefit will continue to increase by 3% each year while the claim is being paid. This helps offset the negative effects of inflation.

The purpose of income protection is to provide you with an income if you are unable to work because of an illness or injury. Your ability to work will be assessed and based on your normal job, whether you can carry out the essential duties it requires. In insurance terms, this is called own occupation cover, because of this, the availability and cost of income protection cover is directly related to your job or occupation.

Some occupations are considered to be a higher risk than others. For example: an accountant will generally pay a lower premium for the same level of cover compared to a builder. This is simply, because the builder has a higher chance of suffering an accident at work compared to an accountant. Due to the degree of occupational risk involved, there are some occupations that will not be accepted for income protection cover. There are four different occupational classes for cover. People in the lowest risk occupations pay the lowest premiums while those in higher risk occupations pay a higher premium. This is based on a standard risk assessment across occupations. Although there are some exceptions for certain occupations, the four broad categories available are:

Occupational Class 1 – Professional, managerial occupations, administration, clerical jobs, for example; accountants, home makers, and managers.

Occupational Class 2 – Occupations involving occasional manual work, for example; agents, guides, chemists, barbers.

Occupational Class 3 – Skilled manual occupations, for example; nurses, teachers, chefs, cleaners, factory workers, painters, drivers, paramedics, bartenders.

Occupational Class 4 – Partly skilled and unskilled manual occupations, for example; construction site workers, fire fighters, guards.