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Why Income Protection Is Crucial For Your Financial Stability
Income protection is a vital form of insurance that serves a significant purpose; providing financial support to employed and self-employed individuals in the event they are unable to work due to an illness or injury. It is designed to replace a portion of the individual’s income if they become incapacitated and unable to perform their duties as normal.
A major benefit of income protection is the peace of mind it offers. By providing a regular income stream to replace a portion of lost earnings, this type of cover ensures the continuation of crucial financial obligations, such as paying bills, mortgage or rent, and daily living expenses. Serving as a financial safety net, it also helps policyholders retain their standard of living, minimising the risk of falling into debt or relying on savings.
In this article, we discuss who can benefit from income protection and why it is such an integral component of maintaining your overall financial stability.
Safeguarding your financial stability with income protection
When a person’s income consistently covers monthly bills, expenses and even luxuries, it’s easy to forget just how vital it is. However, if this income was compromised due to illness or injury, a worker could find themselves in a truly frightening position.
Without the presence of a regular income, an individual may be unable to finance crucial bills, medical expenses, and the requirements of their dependents. To avoid this difficult situation, it is highly advisable to seek an income protection policy.
Anyone who falls under the following categories can seek income protection:
- Self-employed
- Employed for over 16 hours a week
- PAYE employees
- Employers who want to provide income security for key employees
However, it’s important to note that policies will vary greatly in cost depending on the occupation in question. Those working in industries that are defined as high-risk, such as agriculture or construction, will be faced with a far more pricey policy than an individual working in a low-risk job, such as an accountant or sales advisor.
Age, health, lifestyle and medical history are also two factors that will dictate how much income protection will set an individual back, as well as what a policy will include.
Protecting self-employed workers
The requirement for income protection increases in the case of self-employed workers, who face unique challenges when it comes to safeguarding their income.
Firstly, self-employed individuals in Ireland bear full responsibility for their business operations and associated risks, meaning a long absence from the day job yields significant financial consequences. Secondly, with limited access to certain social welfare supports, such as Illness Benefit, the self-employed need a greater level of financial protection.
Providing for dependents
Dependents, such as children, spouses or elderly parents, rely on the income of the primary earner to meet their basic needs and maintain their quality of life. Anyone with dependents will understand the deep need to continue to look after them for as long as possible.
If the primary earner becomes unable to work due to illness, injury or disability, their income may be significantly reduced or lost entirely. Income protection steps in at this point to ensure that a portion of the income continues to be provided, offering a vital financial lifeline to support the ongoing expenses and well-being of their dependents.
Addressing the lack of deep savings
Income protection goes a long way towards providing for those who find themselves out of work and with little or no savings to rely on.
Despite households across the country saving twice as much as in pre-pandemic days, the saving rate is now showing a declining trend since COVID-19 restrictions began to ease, largely as a result of inflation.
This lack of deep savings further argues the case for income protection, and the peace of mind it brings to those struggling to save while simultaneously keeping up with the rising cost of living.
Tips for choosing the right income protection plan
- Start by evaluating your current income and financial obligations. Determine the minimum income you would need to cover essential expenses such as housing, bills and daily expenditures. Also, consider any existing savings or alternative income sources you may have during a period of incapacity to help you determine the appropriate level of coverage needed from an income protection plan
- Next, consider the benefit amount and duration. The amount should be a percentage of your pre-incapacity earnings and enough to provide sufficient financial support. Additionally, consider the duration of the benefit period to choose a plan that aligns with your preferences and financial goals
- Reviewing policy exclusions and limitations is also vital. These may include pre-existing conditions, certain illnesses or injuries, or specific occupational exclusions. Understanding these factors will help you identify any potential gaps in coverage and make an informed decision
- Decide on your deferred period. An income protection policy is payable any time from four to 52 weeks after the work was ceased. This is the aforementioned deferred period, and it is up to the policyholder to select at which point they would like payment to commence
Symmetry Financial Management is your source of financial planning advice
No matter your financial situation, consulting with a qualified financial advisor is always a wise move. They can help assess your needs, explain policy details and provide personalised recommendations based on your circumstances. Their expertise can ensure you make an informed decision and find a plan that suits your requirements.
Symmetry Financial Management is your trusted source for comprehensive financial advice. Our team of seasoned financial advisors offer unbiased expertise, providing valuable guidance on navigating the complexities of income protection. Through our expert guidance, you can find a policy with a third-party provider that is tailored to suit your needs and financial circumstances, ensuring your income is protected at all times.
Get in touch with us today for more income protection advice, and be sure to also stay informed about various financial topics through our regularly updated blog and resource pages.
If you’d like a free, no-obligation consultation for your mortgage, pension or financial needs, get in touch here, call us on 01 6831673 or email us directly on info@symmetryfinancial.ie.
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