If your income stops, most plans stop with it. Income protection (often called Permanent Health Insurance) replaces part of your pay if illness or injury keeps you off work for months or longer. This page covers what it does, how much it can pay, how tax relief works, and the choices that matter so you can set it up with confidence.
Plain English. Figures are illustrative, not advice. Always check your own policy terms and the latest Revenue guidance.
TL;DR (Quick Summary)
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What it does: Pays a monthly income if you cannot work due to illness or injury for the long term. It is not redundancy cover.
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How much: Typical ceiling is up to 75% of gross earnings, less State Illness Benefit and any continuing income. Provider caps apply.
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When it starts: You pick a deferred period such as 4, 8, 13, 26 or 52 weeks. Shorter wait costs more.
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How long it pays: Until you return to work or until your chosen expiry age (commonly to 65, sometimes 70 depending on insurer and occupation).
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Tax treatment: Premiums can qualify for income‑tax relief up to 10% of total income. Benefits paid are taxed under PAYE and USC.
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Who should consider it: Anyone who relies on their pay to cover bills, especially employees with limited sick-pay, the self-employed, and company directors.
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What Income Protection Is
Income protection is a policy that pays a regular monthly benefit if a medical condition stops you doing your job beyond a chosen waiting period. You set the cover amount, the waiting time before payment, and the age the cover ends. Most policies coordinate with State Illness Benefit and other continuing income so the total does not exceed a set share of your pre‑disability earnings.
How It Differs From Other Covers
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Serious illness pays a once‑off lump sum for listed conditions.
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Life cover pays on death.
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Income protection is about monthly income for as long as you meet the claim definition and policy rules.
Why It Matters (With Numbers)
Most households cannot run many months on savings alone. If you earn €60,000, the headline maximum cover is typically 75% of earnings, then less Illness Benefit and any continuing income. In this example the ceiling before offsets would be €45,000 per year, paid monthly until recovery or policy end. Your actual insurable amount depends on the insurer’s cap and proof of earnings.
Deferred Period Basics
The deferred period is your trade‑off between cost and how quickly benefits start. Choosing 13 or 26 weeks often matches employer sick‑pay policies and can lower the premium versus a 4‑week wait.
How Long It Pays
Benefits usually stop when you return to suitable work or reach the policy expiry age. Some contracts include supports that help you return to work gradually without losing all of the benefit at once.
Who Needs it Most?
While anyone who earns an income should consider it, cover is particularly vital for:
- Employees with limited sick pay: If your employer’s sick pay scheme only lasts a few weeks or months, this cover is designed to take over when it stops.
- The self-employed: Self-employed individuals can avail of this product. They are not entitled to the State Illness Benefit until they can show they have not worked in the last 12 months, making private income protection an essential safety net.
- Company directors: Directors can secure highly tax-efficient cover through an Executive Income Protection plan paid for by their limited company.
What Actually Makes The Difference
Pick The Right Deferred Period
Match it to your sick‑pay and savings. If your employer pays 13 weeks on full pay, set the policy to 13 weeks so you do not overpay for early weeks.
Cover The Amount You Need, Not The Maximum
Aim to cover mortgage or rent, utilities, food, childcare, and essential debt. Remember the 75% cap and any offsets for Illness Benefit when you choose the benefit level.
Claim The Tax Relief Properly
Premiums for approved schemes can get income‑tax relief up to 10% of total income through payroll or myAccount. You can claim tax relief at your marginal rate, which is either 20% or 40% dependent on what tax band you are in. There is no USC or PRSI relief on the premium. Benefits paid are taxable under PAYE.
Keep Costs And Rules Simple
Prefer clear terms, a realistic expiry age, and a wait time you can fund. Consider indexation (raises cover each year) and escalation in claim (raises the benefit while you are on claim) if inflation worries you. Many policies include premium waiver while on claim and a proportionate benefit if you return to work part‑time.
Step‑By‑Step: How To Set It Up
Step 1: Check Sick‑Pay And Savings
Confirm what your employer covers and for how long. This drives the deferred period choice.
Step 2: Choose The Cover Amount
Tally essential bills and select a monthly benefit to meet them, within the 75% of earnings ceiling and insurer caps.
Step 3: Pick Deferred Period And Expiry Age
Common waits are 13 or 26 weeks. Expiry age is often to 65; some providers allow to 70 depending on occupation.
Step 4: Decide On Indexation And Escalation
Indexation raises cover each year. Escalation increases the benefit while you are on claim. Both help with inflation but increase cost.
Step 5: Apply And Underwriting
Expect health and occupation questions and possible medical evidence. Terms can include loadings or exclusions based on risk.
Step 6: Claim Your Tax Relief
Ask payroll to deduct premiums under a net‑pay arrangement, or claim via myAccount under “Income Continuance”. The 10% of income annual relief limit applies.
Step 7: Review Yearly
If your salary changes or you move job, update cover and the deferred period. Many policies include guaranteed insurability options to increase cover after life events.
Get personalised advice on Income Protection. No obligation.Speak with a Qualified Financial Adviser
Information only; not personal advice until we assess your circumstances.
Key Policy Features And Options
Cover Level
Usually up to 75% of gross earnings, less State Illness Benefit and other continuing income. Insurer maximums apply (often with a euro cap per year).
Deferred Period
Common choices are 4, 8, 13, 26 or 52 weeks. Some providers offer dual deferred periods for different causes.
Expiry Age
Often 55 to 70, depending on occupation class and insurer.
Proportionate Benefit
Pays a partial benefit if you return to lower‑paid or part‑time work after a claim.
Premium Waiver On Claim
Premiums usually stop while benefits are being paid.
Hospital Cash And Back‑To‑Work Supports
Some contracts pay small extras during hospital stays or include rehabilitation and return‑to‑work supports.
Tax Treatment In Ireland
Premiums
For approved schemes, you can claim income-tax relief on your premiums at your marginal rate (either 20% or 40%). This relief is capped at 10% of your total annual income. Relief can be given through payroll or claimed via myAccount. There is no PRSI or USC relief on the premium.
Benefits
Payments from approved income protection are treated like salary and are taxed under PAYE and USC. The insurer usually deducts this before you are paid.
Employer‑Paid Premiums
Employer contributions to an approved scheme can have specific payroll treatment. For unapproved schemes, premiums are a benefit‑in‑kind for the employee. Check your company’s setup.
Types of Income Protection Plans
Group Income Protection
Arranged by an employer. Premiums are often lower and definitions can be broader, but cover usually ends when you leave the employer.
Personal Income Protection
Owned by you and portable when you change jobs. You control the options and can adapt as your circumstances change.
Executive Income Protection
If you are a company director of a limited company, you can have an executive income protection plan. This is paid for by the company through the company account and is 100% tax deductible as a business expense, making it a highly tax-efficient way to arrange cover.
Claims: What To Expect
During The Deferred Period
Keep records of sick‑pay, dates, and medical certificates. Submit forms early if it looks likely you will go past the waiting time.
After Approval
The monthly benefit is paid in arrears and continues while you meet the policy’s incapacity definition and policy rules.
Reviews And Returning To Work
Claims can be reviewed with medical and financial updates. Proportionate benefit may apply if you return on reduced hours or to a lower‑paid role. Some policies escalate in claim each year by a fixed percentage.
Common Exclusions And Limits
Typical Exclusions
Policies commonly exclude intentional self‑inflicted injury, disability arising from alcohol or drug misuse unless prescribed, and participation in a criminal act.
Territorial And Residence Limits
Payment outside Ireland or the UK can be restricted or time‑limited. Check your schedule if you plan to live abroad.
Underwriting Exclusions
Your policy may include extra exclusions for specific medical histories, occupations, or hazardous hobbies. Always read the schedule.
A Quick Worked Example (Illustrative)
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Salary: €70,000
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Target cover: 75% of earnings less State Illness Benefit and any continuing income
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Deferred period: 13 weeks
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Expiry age: 65
If approved at the maximum, the headline cover before offsets would be €52,500 per year, paid monthly after week 13, and taxed under PAYE while in payment. Actual payable benefit will be reduced by your Illness Benefit entitlement and any part‑time income if you return on reduced hours.
Get personalised advice on Income Protection. No obligation.Speak with a Qualified Financial Adviser
Information only; not personal advice until we assess your circumstances.
FAQs
Is Income Protection The Same As Serious Illness Cover?
No. Income protection pays a monthly income for as long as you meet the claim definition. Serious illness cover pays a once‑off lump sum if you are diagnosed with a listed condition. They solve different problems.
How Do I Claim The Tax Relief On Premiums?
If your employer runs the deduction under a net‑pay arrangement, relief is given through payroll. Otherwise claim via Revenue myAccount under “Income Continuance”. Relief is capped at 10% of total income for approved schemes.
Will My Benefit Be Taxed?
Yes. Payments from an approved income protection scheme are taxed like salary under PAYE and USC. The insurer normally withholds this before paying you.
What Deferred Period Should I Choose?
Match your sick‑pay and savings. If work pays 13 weeks on full pay, a 13‑week deferred period often balances cost and cover. Other common options are 4, 8, 26 or 52 weeks.
