Is your greatest asset protected?

We don’t usually think of our current income and our future earnings as an asset. However, if you take a moment to think about it, the money you earn pays for almost everything you have….mortgage, car loan, bills, children’s education, insurance and so on. Without it, you are faced with a pretty worrying picture.

Nobody wants to think about what life would be like should disability or illness strike. But the reality is that 1 in 6 Irish people will be out of work for more than 6 months at least once during their career. With those who are out of work the average length of claim is 5.5 years. It is surprising then that we protect ourselves against so many of life’s eventualities, yet so few of us protect our salaries.

This is where an Income Protection plan is so important and is appropriate to anyone earning a salary, both the self-employed as well as other employees, regardless of their age or stage of life. With Income Protection you pay a monthly premium which is based on your occupation and the state of your health. This ensures that in the event of an accident or illness, which leaves you unable to work, the policy will pay you a regular income. As there are no restrictions on the type of injury, illness or disability that an income protection plan policy covers, you get complete peace of mind. Best of all, you get to choose and tailor an income protection plan that suits your individual circumstances, with a range of cover types. What’s more, as your needs and circumstances change, you can adapt your income protection policy to suit changes in your life.

In general, we tend to be overly optimistic about how we would manage if we were unable to work due to illness or injury. We over-estimate sick pay arrangements and the support provided by the State. Some employers will cover sick pay for the first 6 months of illness, however, they are not obliged to. The State Illness benefit for 2009 is only just €10,900. And if you are self-employed you don’t even qualify for this.

The reality for most people is that their level of “outgoings” either matches or exceeds their income. So, for a person who no longer is earning that income there will be a significantly negative impact on their lifestyle. But what can you do to protect your salary?

Take an example of a male, who is a sales rep, 38 next birthday is a non smoker and would like to take out an income protection policy which would pay him €500 per week after a deferred period of 26 weeks and up until age 65. The net cost after tax relief would only be €50.49 per month*. If he were to cover himself to age 60 the quote would be cheaper again.

Income Protection should form a core part of any financial plan.

* Quote used is based on the rates applicable to Friends First Guaranteed protection product as at 13/08/2009

Thursday, August 13th, 2009, by admin and is filed under "Financial Services ". You can leave a response here, or send a Trackback from your own site.