PERSONAL PROTECTION

A protection need may be defined as a need to provide against a risk that you and/or one of your dependants suffer through the loss of earned income from death or illness. This could have a massive impact on your monthly budget – you only have to ask that friend or colleague what happened to them when they had such an experience….or maybe you don’t!

At ITSYOURFUTURE we suggest that insurance which protects against illness and/or death is in fact an asset. Afterall, what other investment would provide for a lump sum or regular income when it’s needed most.

Remember: If you have adequate cover, it means your savings will remain intact to provide for “you and yours”.

DEATH-IN SERVICE

There are four types of protection needs that can arise on death:

Loss of earned income
Cost of provision to maintain your dependants
Repayment of outstanding loans
Inheritance Tax

Dealing with the first three and assuming you have adequate mortgage cover to pay off any outstanding mortgage, it is recommended that you have an amount of Pension Term Assurance which can qualify for tax relief and additional life cover to ensure there is an adequate amount of life cover to deal with any of issues arising on your death. The aim here is to ensure that any existing assets which may pass to your family will not be in any way be used to reduce any outstanding loans or financial commitments

Ill-HEALTH

There are two types of protection that can arise on disability:

Long term disability which does not permit you to do your own occupation (or sometimes any other occupation)
A life threatening illness which requires you to take six months or more unpaid leave from your work

In order to protect against the first type of illness, one may affect a Permanent Health Insurance (PHI) policy. This policy pays out an income in the event of loss of earned income due to sickness or disability lasting for a minimum period, usually thirteen (13) weeks (as prescribed by most insurance contracts).

Typically, there is a maximum amount of cover that can be insured under such a policy and depending on the life assurance company can be 75% or 66% of gross earnings less the State disability benefit (personal rate). Cover can be put in place until you return or reach your Normal Retirement Age (e.g. 60/65) and you can choose whether you want a period of 13, 26 or 52 weeks for the policy to activate a claim, the difference being an impact of cost of providing same. You can insure a fixed amount or an amount that increases in line with inflation and you can also indemnify the maintenance of your pension contributions.

Note

You must be in full-time paid work or be self-employed to get and continue to have income protection cover.

With respect to insuring against a life threatening illness, for example, heart attack, stroke, cancer, you can put a Serious Illness Policy in place which pays a once-off lump sum to you on satisfaction of a claim

Note

Eligible illnesses and exclusions will be listed in your individual policy and will vary between providers. Your age, gender, health and family medical history will affect your eligibility and the cost.

TAX ISSUES – PROTECTION POLICIES

DEATH IN SERVICE - typically this is company sponsored and there is no relief applicable although it should be noted that up to four times final remuneration may be paid as a tax free lump sum to a spouse on death.
INCOME PROTECTION – any claims in payment are subject to income tax.
SERIOUS ILLNESS – any premiums paid are not subject to tax relief and any claims paid are not subject to tax.

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