Welcome to the Financial Column in association with Moneyplus, Bridge Street, Boyle.
Q. I have a wife and two small children. I am self-employed and worry about how they would manage if I wasn’t able to work for a long period. How could I protect myself and my family against this happening ?
A. Firstly, in the event of you being unable to work for a long period, because you are self-employed you would not be entitled to state sickness or disability benefit. With a wife and two small children you need to have sufficient provision in place in order to protect yourself and your family against a significant fall in your income. This is very important as, for most people, their most valuable asset is their income.
In addition to having adequate life insurance you should also consider having specified illness cover (also referred to as serious illness cover) and/or Permanent Health Insurance.
Specified Illness (Serious Illness) Cover provides protection by paying out a one-off lump sum on the diagnosis of a specified illness. The specified illnesses covered by the policy cover a number of serious illnesses, as specified in the policy terms and conditions, such as cancer, strokes, heart attacks etc. This lump sum is tax free.
Permanent Health Insurance (also known as Income Protection). This type of insurance policy is used to replace part or most of your income in the event of you being unable to work due to sickness or injury. The policy pays you a regular sum, i.e. a replacement income, until you are able to return to work, irrespective of the length of time you are out of work up until the policy matures, usually at either age 60 or 65.
The maximum amount of your income that you can protect is restricted to 75% of your earnings (less state sickness or disability benefit, if eligible) up to an income limit of €115,000 per annum. Premiums paid for Permanent Health Insurance are eligible for tax relief at your marginal rate and the cost of the premiums will depend on your occupation. Benefits paid are taxable and subject to income tax as they are effectively income replacement.
Income Protection policies have a deferred period before the benefit is paid – this deferred period is usually 13,26 or 52 weeks. Therefore you should have a savings or emergency fund to cover a drop in your income until the deferred period is completed.
You should consult an independent financial adviser like Money Plus to ensure you get the most suitable advice in order to protect yourself and your family, depending on your specific circumstances.
If you have any financial questions you would like answered in this column please submit details in confidence to [email protected]
MoneyPlus are experienced investment and financial brokers and have been in the business of financial and investment planning for many years. They are dedicated in providing bespoke financial planning advice to clients. If you would like further advice on the above or any other financial information please contact Belinda McCauley in our Boyle office on Bridge Street on 071 9194000 or [email protected]
Boyletoday.com/MoneyPlus accept no responsibility for any decisions taken as a result of advice provided in this column. A reliable recommendation can only be made following a full detailed consultation taking an individual particular circumstances into consideration