How much Income protection cover do I need?

Remember you are trying to replace income of a household. So, this will vary on a case by case basis, but rule of thumb is a minimum of 4 – 5 times your salary.

What will affect my monthly income protection or life assurance premium?

Age, smoker status, whether you cover one or two people, current health status, amount of cover needed and for how long.

What’s the difference between mortgage protection and life assurance cover?

Mortgage Protection Insurance is specifically designed to pay off the balance outstanding on your mortgage. The balance on your mortgage and mortgage protection reduces over time. Whereas the cover amount on a life assurance policy stays level over the full term of the policy.

How to protect your income

26 April 2023

Top tips from financial expert Paul Merriman.

The cornerstone of any sound financial plan is protecting what you have as unforeseen circumstances can have a significant influence on your life & our families.

Although serious diseases, accidents, or even fatalities are not topics that people enjoy discussing, it is crucial that you have the right coverage in place in case they do occur.

Choosing the appropriate financial protection products provides you or your family with a financial safety net, should the worst happen.

It offers your family financial stability in the case of your death.
In the case of a major sickness, it eliminates financial concerns.
If a sickness or accident prevents you from working, it can assist replace your income.

However, it can be confusing trying to figure out which one you need. How much cover and the type of cover you need really depends on your circumstances & where you are in your financial life cycle. For instance, if you don't have any dependents income protection might be best for you.
If you have children, a blend of income protection and life insurance might be the best for your situation. It is always advised to discuss it with a financial planner before you buy a product so they can help you pick the right level of cover for your needs.
Here’s a quick rundown of the most common policy types and what they do:

Income Protection Insurance

Your ability to earn money is your most valuable asset.
Income protection insurance covers you in case you are unable to work due to illness or disability. This allows people to continue to be paid a salary until such a time they're able to return to work or until the normal retirement age as per the term of the income protection contract. Income protection should be the foundation of any financial plan & it should be done before any investments are considered.
Income protection gives you peace of mind knowing that you can continue to pay your mortgage, household bills and living expenses if you are unable to work.

Life Assurance

Life can be unpredictable, and if you were to die during the term of the policy this cover will pay your family a lump sum to protect them from any financial hardships in your absence.
Your financial advisor can help you identify the level of cover that would be required to compensate your family for the loss of your income.
Life assurance is even more important where there is only one income coming into the household as the loss of this income would be detrimental to the remaining family's lifestyle.

Mortgage Protection Plan

Mortgage protection plan helps you secure your home by paying off the mortgage to the lender if you were to die, protecting your family from any financial burden. Depending on the structure of the policy, this would only cover outstanding debt on the family home.
Mortgage protection is a type of term assurance, although this is the very minimum that is legally needed when taking out a mortgage.

Critical Illness Cover

Critical Illness Cover will pay out a lump amount in case you are diagnosed with a major sickness. This cover can be purchased separately or in conjunction with your life insurance policy.
There will be a range of illnesses that qualify for a payout based on your insurance provider.
This type of coverage may be very helpful during what will already be a trying time for a family since it can lessen the financial strain that comes along with a major sickness if you are unable to work or if your medical expenses are skyrocketing.
You need to read your insurer's terms carefully, not just for the range of illnesses they cover but also their type. For example, while a heart attack may be covered, a cardiac condition such as angina may not, also not all types and stages of cancer are covered.

If you become seriously ill and have a critical illness insurnace cover in place, you are paid a one-off lump sum (the illness must be lister in your policy). Income protection on the other hand will ensure you are paid a guaranteed monthly income if you cannot work. Income protection will continue to be paid until you are fit to return to work or you reach the end of your policy term.