Why Income Protection Might Be the Most Important Cover You’ve Never Talked About
Life is unpredictable. One month you’re working full time, and the next, an illness or injury could take you out of work entirely. While it’s not something anyone wants to think about, the financial fallout from losing your income, even temporarily can be devastating. That’s where Income Protection Insurance comes in.
If you or your clients rely on a regular income to support your lifestyle or family, it’s time to get familiar with how Income Protection works and why it’s a smart addition to any financial plan.
What Exactly Is Income Protection?
Income Protection is an insurance policy that pays you a regular monthly income if you can’t work due to illness or injury. It is in a sense a salary replacement, the policy kicks in after a waiting (or “deferred”) period and continues to pay out until you’re fit to return to work or the policy ends.
For most people, this kind of cover is critical because:
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It pays a percentage of your income (typically up to 75%)
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Claims can be paid for years, not just months
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It covers both physical and mental health issues
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Policies often include extra supports like early intervention services
The harsh reality of a recent survey of claimants, for example, highlighted that over 60% of claims are made by people under 50, and over 30% by people under 40, this isn’t just for older workers.
Do You Actually Need It?
If you’re asking whether most people need income protection — the short answer is yes. But let’s break it down:
1. How long would your employer pay you if you were off sick?
For many, it’s just 2–3 months (or even less). After that, you’re on your own, unless you have some kind of staff income protection (which is rare).
2. Are you self-employed?
No sick pay. No fallback. Income Protection might be your only lifeline.
3. Have you any savings?
Even with a rainy-day fund, a long-term illness or injury could drain savings quickly, especially when they’re already earmarked for kids’ education, retirement, or emergencies.
4. Could you live on the State Illness Benefit?
In 2025, the maximum State Illness Benefit is €244 per week, or just over €1,000 a month, not enough to cover most people’s monthly bills.
How Much Income Should You Insure?
This depends on what you need to keep your lifestyle afloat. Here are a few things to think about:
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Monthly bills: Mortgage, rent, utilities, food, childcare, you name it.
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Future goals: Savings for education, retirement, or big purchases.
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Partner’s income: It’s not guaranteed. Their support might not cover everything if both of you face an income drop.
Zurich’s budget planner can help figure out how much cover you might need. A good advisor will walk you through this based on your individual circumstances.
Can You Insure All of Your Income?
No, but close.Legally you cant be better off financially from claiming income protection. You can typically insure up to 75% of your pre-tax income. If you’re employed and eligible for the State Illness Benefit, that amount is offset. If you’re self-employed (and not eligible for the State benefit), you may insure the full 75%.
Tax Treatment: What to Know
The government are willing to pay for 40% of the cost of the cover. Read that again!.
The tax treatment depends on how the policy is set up:
Personal Policy:
- Benefits are taxed like normal income via PAYE and are subject to USC and PRSI.
Executive Policy (Employer pays):
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No benefit-in-kind applies for you.
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Benefits are taxed as income when received.
Can the Cover Be Adjusted Over Time?
Yes! Life changes, and your cover can too. We recommend and review as required on your behalf, typically at major life events such as marriage, maternity, mortgage, promotion, etc.
Final Word
Most people wouldn’t think twice about insuring their car or their home, but your income is what pays for everything else. Losing it, even temporarily, can derail your financial plans. Income Protection doesn’t just provide money, it buys time, options, and peace of mind.
Speak to a Qualified Financial Advisor today. Get In Touch
