Tuesday, 22nd May 2018
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John Smiles

Qualified Financial Advisor

Why do I need Income Protection Insurance?

The old adage, ‘your health is your wealth’ is very true. Good health gives us the ability to work and earn an income, spend quality time with our families and engage in our favourite recreational activities.

It is also true that we never miss something until it has gone. Losing our health because of an accident or illness could rob us of our ability to work, rest and play and instead of being providers, we become dependent on others for our care.

If you are unfortunate enough to get sick, the State Disability benefit for an individual is €193 per week.

For a person earning the average industrial wage of €673 per week, this represents a fall in income of €480 per week. For many families, this will mean prioritising bills that put food on the table and not paying longer term commitments such as the mortgage or rent. This strategy might work if the illness is short term and you can quickly get back to work. If the illness is more long term, a different strategy is required.

Income Protection Insurance provides an income if the insured person is unable to work due to accident or illness. A person on average earnings above with an income protection policy would receive €193 per week from the state and another €311.75 from their policy – a total income of €504.75 per week. The income shortfall now of just €168.25, compared to €480 per week, gives the household budget a lot more options and provides income certainty throughout the illness.

Some people tell me they cannot afford the premium but they insure their homes and their cars. Why not insure their income which actually provides their lifestyle? Others tell me they could manage from their savings. They do not understand how valuable their regular income is. A person lucky enough to have €50,000 in savings with outgoings of €3,000 per month could expect their savings to last just 17 months, what then?

Most of us simply believe that ‘it won’t happen to me’. Can your family, afford to take that chance?

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