Income protection could be a real lifeline in the event of serious illness
2017-03-01 17:51:19 -
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By Staff Reporter

There is a huge impact, both physically and mentally, on any person who is diagnosed with a serious illness. But few stop to think of the financial impact: the loss of income and treatment costs that can reach as high as €1,200 per month for some conditions like cancer.
Many people mistakenly believe that having a medical card or private health insurance will cover them for these extra expenses. The stress of managing this financial burden only makes the situation of illness worse.
So how do we plan ahead in order to avoid such a burden in the event of the diagnosis of a chronic illness?
Having a good overall protection plan in place if you are unable to work brings great peace of mind. Before you start, you need to know what benefits you would be entitled to from your employer and/or social welfare. Bear in mind that if you are self-employed, there is currently no social welfare benefit for you. In other cases, your employer may allow you to take early retirement and draw down your pension if you are permanently unable to do your job.
Keep an easily accessible savings pot available, worth three to four times your net monthly salary, that would support you and your family for the short term. This ‘rainy day fund’ is extremely important to have in the event of a serious illness knocking on your door.
Aside from this, everyone should have a ‘serious illness policy’ in place which ensures that a lump sum is paid out to you if you are diagnosed with a serious illness. The list of illnesses covered varies between insurers but usually includes heart attack, types of cancer, multiple sclerosis, kidney failure, motor neurone disease, brain tumours and severe burns. 
Income protection policies are also important. This kind of cover replaces up to 75 per cent of your regular income in order to maintain the level of earnings on which you base your living. The list of illnesses covered is much broader in that it will cover “any illness or injury” that prevents you from being able to work, and also includes stress and back related issues. Payment of the benefit comes into effect after a certain deferred period and continues all the way to age 65 if necessary, or until you return to work.
You can take out income insurance if you are in full-time work or are self-employed and earn an income. It protects you under certain circumstances, for example it will not be paid if you become unemployed. Pre-existing, drug-related or pregnancy-related conditions are not covered by this policy.
Most do not realise that payments to this type of plan are eligible for income tax relief at your marginal rate of tax, which greatly reduces cost. If you claim on this plan, your benefit is treated as normal income and so is assessed for income tax, PRSI and the Universal Social Charge.
Some life companies offer added benefits. Zurich has a very popular specific type of cancer cover, while Aviva is known for its Best Doctors Second Medical Opinion service. The cost of these covers varies and depends on factors such as age and medical history.
Seek advice on your personal protection requirements from an independent financial advisor who will identify your personal requirements through the completion of a detailed fact find.

TAGS : income protection illness cancer lifeline
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