A colleague of mine has been out of work due to illness for the last two months and told me he is currently relying on social welfare, while he awaits recovery and return to work. This made me very nervous, as €220 per week would not even cover my rent, food, car loan, etc. What can I do to prevent financial stress should I need to be on extended sick leave for some reason?
Financial stress during periods of extended sick leave can be mitigated against by buying Income Protection Cover. In fact, this is one of the top two protections everyone should have, the second being Life Insurance. Income Protection is something I recommend to all my clients.
Income Protection is the only way to protect you and your family from financial stress if you are suddenly unable to work due to illness, and so, rather than asking if you can afford it, ask yourself if you can afford not to?
I’ll use my savings
This sounds good in theory, but many people are shocked at how quickly their savings diminish?
Financial experts estimate €50,000 last just 17 months based on monthly outgoings of €3,000, whereas the average claim for long term income protection is approximately seven years.
I’m covered by my employer
While some people are able to return to work within a year or two, for others, it takes much longer. Some people are never in a position to return to work at all.
When it comes to sick pay, what people receive from their employers varies greatly, and many people do not know what they will get at all. For example, do you know your employer’s sick leave policy and whether they will help out financially?
A quick call to your HR department will provide you with a clearer picture of the help their employer would provide. Unfortunately, many people are surprised by the limited nature of financial support they would get in the case of long-term sick leave, leaving them wondering, can I afford not to protect my income?
I already have Specified Illness cover
Income Protection is designed to protect your earnings throughout your working life. If at any point you suffer an illness or injury, which stopped you from working, you would still have some form of income until you are medically fit to return to work or reach retirement age.
Specified Illness cover (or Critical Illness Cover) is different; this type of cover pays a cash lump sum should you suffer one of the illnesses covered by the policy.
The most common Income Protection claims are for psychological/psychiatric illness or orthopaedic conditions, conditions that can prevent you attending work but are highly unlikely to permit a Critical Illness claim.
The primary function of Income Protection is to provide a regular income if you can’t work for a period of time due to an accident or illness, but, depending on the policy you take, there may also be many additional benefits, which are worth discussing with your financial advisor. These include:
Hospital Cash Benefit: (replacement income if you’re hospitalised for more than seven days during the deferred period).
– Waiver of Premium: no premiums are paid when a claim is in payment, so your plan continues uninterrupted.
– Partial Benefit: If you return to work earning less than before, you may be eligible for a partial payment.
– Best Doctors/Second Medical Opinion: this benefit offers a world-class second medical opinion service by drawing on the knowledge of a range of medical experts around the globe. It helps to ensure you have the right diagnosis, leading to the right treatment and the right care. It is automatically included in the policy.
Family Care Benefit: This counselling service is automatically included in the policy.
And, finally, you can claim tax relief on your premiums at your marginal rate.