- What arrangements does your employer have if you are on long term sick leave?
- How long would your savings last if you were to draw on them every month to cover the cost of day to day living?
- How would you continue to pay for all your outgoings without income?
These are questions we would all come across if we couldn’t work and had to rely on Social Welfare which would entitle us to just €188 per week. Worse still if we were self-employed we are entitled to a big fat zero – that’s right nothing at all.
We are programmed to protect our belongings (car/house insurance), we protect our dependants’ financial future if we were to die prematurely (life assurance) and we also protect our lifestyle for when we retire (pension) but what are we doing about protecting our lifestyle while we are in our working years?
Look at it another way, what do you think is your biggest financial asset?
- Is it your home? (average house price in Dublin is circa €230,000)
- Is it your earnings to retirement? (annual salary of €60,000 increasing by 3% p.a., aged 40 to retirement age 65 = €2.1million )
As you will see from above for most people our salary is the largest asset we have.
How do we go about protecting our biggest asset ?
Income Protection provides you with a Replacement Income if you are unable to work due to any illness, injury, disability or accident. It is also very tax efficient as the premium you pay for this valuable cover qualifies for tax relief. That’s right the government will actually help us pay for this cover!
You are entitled to cover 75% of your salary less any social welfare payments if you are a PAYE worker (your social welfare entitlement would be €9,776 p.a.).
Unfortunately you are not entitled to any social welfare payment if you are self-employed but you can cover the extra €9,776 p.a that you are missing out on. Most people would cover themselves for their working life until retirement which stands at age 65 at the moment.
Example : based on the criteria above, a 40 year-old PAYE employee with a salary of €60,000 would be able to cover themselves for €35,224 (75% of €60,000 less social welfare of €9,776). The cost of putting this cover in place would be approx €74 per month (this would be net of tax relief @ 41%).
Note : The above Example was based on a male life aged 40 and non-smoker , occupation class 1 (accountant), retirement age 65, deferred period of 13 weeks, indexation on benefits/premiums, tax relief of 41% and guaranteed rate.
Finally, for those of us who think it will never happen to us, the actually likelihood of long term absence is twice as high as the likelihood of being diagnosed with a critical illness and there is also a 1 in 6 chance of being out of work for more than 6 months.
I’m sure you’ll agree these statistics are very frightening especially if we still have to pay for childcare, light and heateat, car loans, holidays, entertainment, insurance, food, VHI, savings & investments, mortgage and the list goes on and on…
It can be a frightening prospect however the good news is that it’s not to late to do something about it.
For further information/quote or for a free financial review please contact us here using the quick enquiry form, or you can call us on (01) 8693400,