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Income Protection Insurance and Unemployment Insurance Benefits

happy familyThe Benefits of Income Protection and Unemployment Insurance

You may not have considered the need for unemployment life insurance or income protection insurance, but it is a serious consideration for any Irish worker. After all, how would you manage without your income or one that is severely reduced if crisis struck?

No one knows what is around the corner and the unexpected can happen at any time – you are suddenly made involuntarily redundant and lose your income; or you fall ill or suffer from an injury which necessitates a long period away from work, possibly meaning you have to survive on limited sick pay.

The good news is that income protection or unemployment insurance, can help in circumstances such as this. Depending on the type of the cover you have, should you become unemployed through no fault of your own or become unable to work due to accident or sickness, then following a successful claim, the policy will typically pay a tax free monthly sum until you are back on your feet or have found another job.

This will help you financially at a time when you will probably desperately need it, meaning you can concentrate on recovering or finding a new job, without major money worries.

Policy terms and Features

There are a number of income protection and unemployment insurance options within the market place, often with slightly different policy terms, features, benefits and prices! However, they all typically have the same aim – to provide you with a financial cushion in the event of incapacity or involuntary unemployment.

What can you expect from your cover with AOR?

In the event of a successful claim a typical payment insurance policy may offer the following benefits:

  • Payments starting anywhere from 30 – 90 days after the covered event happens. Some providers will start to pay out just 30 days after redundancy or incapacity whereas others may make you wait for up to 90 days;
  • Monthly payments for up to 12 – 24 months, or when you get back to work, whichever event is sooner. Again, policy features and benefits vary, with some income protection insurance providers paying out for a year with others covering you for up to two years’. In most cases, the latter option may be more expensive than 12 months’ potential pay outs, but not always;
  • A tax free monthly amount typically up to 50% of your gross monthly earnings or €1,500 – though this may vary depending on your provider.

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    Types of Cover

    Now that you have an understanding of what this insurance can do for you, let’s look a little further in to the different types of cover that you can get, and other terms that may be used for this type of protection.

    Income protection insurance may also be known as accident, sickness and unemployment insurance. However, other product names include the three most common which are: income protection insurance, mortgage protection insurance, payment protection insurance and loan insurance.

    While they all still provide an income in the event that you are made involuntarily redundant or are incapacitated, where the money received goes will typically differ.

    Mortgage Payment Protection Insurance

    Mortgage protection life insurance pays out a tax free monthly sum that is used to help meet your mortgage repayments as well as associated costs such as life and / or home insurance.

    Loan Payment Protection Insurance

    Like mortgage protection life insurance, loan insurance provides debt specific cover. So, if you have any loans or other borrowing, the loan payment protection plan can help meet these monthly commitments.

    Income Payment Protection Insurance

    Income protection is a non-debt specific form of accident, sickness and unemployment insurance and pays out a monthly sum that can typically be used for whatever purpose you wish. For example, it could be used for rent payments, grocery bills or even for a new suit for when you have a job interview! It is flexible in that you choose where the income goes.

    This form of income protection insurance – which offers a short term financial solution in the event of involuntary redundancy or incapacity – should not be confused with the longer term version that pays out in the event of long term illness but not redundancy. The latter requires a medical examination before you are accepted for cover – typically unlike a payment insurance policy – and, because of the type of protection it provides, often tends to cost a lot more. This is because, potentially, it could pay out for many years’ in the event that you become too ill to work.

    Levels of Cover

    We have now discussed what income protection insurance does and the different types of cover you can purchase. On top of that, you have a choice of the level of protection you want as well.

    A full payment protection insurance policy will typically cover you against the financial fallout of being made involuntarily redundant or incapacity. However, you can opt to have incapacity (accident and sickness) cover only, or unemployment (redundancy) protection only.

    For example, if your employer provides a generous sick pay scheme – meaning that if you were off work for a period of time that you would not suffer financially – then you may wish to have unemployment cover only.

    On the other hand, if you have been with your employer for many years and believe that you would get a healthy redundancy package in the event of involuntary redundancy, then you may want to opt for incapacity cover only.

    Of course, these are just general examples and everyone’s circumstances are unique. If you are unsure about the cover you need, then always speak to your potential insurance broker or provider or an independent financial advisor.

    The Cost

    Like the policy features and benefits, the cost of cover can vary among providers. Often going with an independent provider may find you a more competitively priced deal. Most policies are charged on a basis of €x amount for every €100 worth of insurance required.

    Shopping around and comparing these costs – as well as the policy terms – may help find you suitable cover.

    In summary, as the old saying goes, the only certain things in life are death and taxes. So, if you are worried about what may lie ahead, now may be the time to look at your payment protection insurance options.

    More information available at our Life Insurance, Mortgage Protection, Serious Illness, Income Protection page