Welcome to the fifth guide in our seven-part series on how to get income protection insurance on bonkers.ie. In this guide, we will define and explain the different terms you will face when applying for income protection.
All the definitions here will be broken down in a simple and easy to understand way, so you can become comfortable with income protection related jargon.
You can find the rest of the guides in our income protection series linked within this guide and at the end of this article.
1. Deferral period
The deferral period, also known as the wait period, is the length of time you will need to wait before your claim gets paid out, should you become unable to work.
This period is usually set at 26 weeks. However, you can choose for your deferral period to be shorter, options include 4, 8 or 13 weeks. It is important to bear in mind that the shorter your deferral period is, the more expensive your premium will be.
You can also choose a longer deferral period, up to a maximum of a year. Longer deferral periods come with a lower premium, but mean you will have to wait longer for an income in the event you cannot work.
When selecting the deferral period for your policy, it is worth ensuring that your wait period is suitable for your situation, to ensure that you are not left short in the event of an accident or illness.
2. Occupation class
Insurers will judge your premium based on how risky they consider your profession to be.
Professions are placed into four categories, with class one being the least risky, and therefore cheapest, and class four being the riskiest, and thus the most expensive.
- Class One: Non-manual, no driving, desk-based e.g. accountant, software engineer; or highly qualified professional work e.g. lawyer, architect, pharmacist.
- Class Two: Non-manual, customer-facing, may involve driving or time on your feet e.g. retail worker, sales representative; or veterinary or dentistry work.
- Class Three: Skilled, light manual work e.g. domestic electrician, carpet fitter; or those in caring roles e.g. teachers, social workers, nurses.
- Class Four: Skilled manual, not at heights or underground e.g. carpenter, plumber, bricklayer.
- Not Accepted: Some professions are not accepted at all for income protection. These include: unskilled heavy manual labour, operation of heavy machinery, work at heights, underground work, offshore work, and jobs in the sport or entertainment industry.
Those in class four may also be denied income protection, due to the heightened risks associated with their work. However, all insurers have their own classification systems, so make sure to shop around and discuss any queries with our financial advisors.
Indexation is an optional addition to your policy that increases your cover to help combat rising inflation.
By adding indexation, your premium will increase automatically by 4% each year and also adds 3% to your cover. This means that as prices rise, the amount you can claim will rise to ensure you can meet your expenses.
This is something you can take out when you take out your policy initially, or have a change in circumstances. You cannot add this during the policy term.
4. Escalation of claim
An escalation of claim is another optional benefit you can add to your policy.
If you become unable to work due to illness or injury for over a year, an escalation of claim option will increase your cover annually by 3%, to ensure you can continue to cover your expenses as prices rise.
This is an option you can choose when you take out your policy. Additionally, if you alert your provider of an income or job change, you can add or remove this option.
Like indexation, cannot be added afterwards unless you have a change in circumstances. This may also depend on the insurer's procedures at the time.
5. Tax relief entitlement
With a personal income protection policy, you can get tax relief at your marginal rate on the premiums you pay.
This is one of the main benefits of income protection insurance over other forms of safety nets for your income.
If you need to claim, the insurer will pay your income protection benefit directly to you after tax, USC and any other relevant deductions.
6. Personal income protection
Personal income protection refers to a policy that is taken out by the person being insured. It is your own policy. There is no third party involved in the payment of your policy payments such as your employer.
You pay the premiums on your policy and any claims that are made are paid directly into your bank account by the insurer.
You can cover yourself entirely, or top-up the income protection cover offered by your employer. Remember, you are only entitled to cover 75% of your annual salary, which will include anything your employer or state benefit offers.
7. Executive income protection
Executive income protection insurance is a cover offered by your employer. This is classed as a business expense to your employer.
The employer pays the premiums to the insurer, and in the event, you cannot work due to injury or illness, the insurer will pay your employer, who will pay the claim to you as salary.
It is important to fully understand any cover being offered by your employer, as it might not cover your whole income. In this case, consider taking out a small personal policy to cover the rest.
Moreover, you should find out the deferral period and any exemptions in the policy offered by your employer.
Get income protection insurance with bonkers.ie
Now you feel comfortable with income protection-related jargon, head over to our income protection comparison page, fill in a few details, and we will start comparing the different policies available from Ireland’s leading insurance providers.
So make sure to apply online with us today to see if you could get cover in less than an hour!
Take a look at our other income protection guides
If you found this guide helpful, make sure you check out the other income protection guides in our series. You may be interested in the following:
- Check out our Quickstart guide for a general summary and links to other income protection guides.
- Unsure of how to use our income protection service? Check out our guide on how to compare income protection on bonkers.ie.
- Thinking of switching or cancelling your income protection policy? Check out our guide on cancelling your income protection.
- Still have questions? Check out our guide answering the most common questions on income protection.
- Discover the different things you need to keep in mind when taking out a policy here.
- Want the general lowdown on what income protection actually is? Check out our guide explaining it.