Last Updated on: 4th March 2025, 10:35 am
Income protection insurance is a crucial financial safeguard, ensuring you continue to receive a portion of your salary if you’re unable to work due to illness or injury. However, many people in Ireland hesitate to take out a policy due to the cost. The good news? There are several ways to reduce the cost of your income protection insurance without sacrificing essential coverage. Here’s how.
1. Choose a Longer Waiting Period
The waiting period (also called the deferment period) is the time between when you stop working and when your income protection payments begin. You can choose from:
- 4 weeks (higher premium)
- 8 weeks
- 13 weeks
- 26 weeks (most common)
- 52 weeks (lower premium)
Tip: If your employer provides sick pay for a set period, align your policy’s waiting period with it to avoid unnecessary overlap and reduce costs.
2. Adjust the Level of Cover
You can insure up to 75% of your gross income, but you don’t have to take the full amount. A lower level of cover means lower premiums.
3. Opt for a Shorter Policy Term
Most income protection policies last until retirement (typically 65), but if you expect to change careers, retire early, or build significant savings, a shorter policy term (e.g., up to age 55 or 60) can reduce costs.
Considerations:
- If you have other financial backup plans (investments, pensions, etc.), a shorter-term policy may be sufficient.
- If you work in a physically demanding job, you may retire earlier, meaning you don’t need cover until 65 or 70.
4. Review Your Occupation Class
Your job affects the cost of your income protection policy. Occupations are classified based on risk:
- Low-risk jobs (e.g., office workers, accountants) have cheaper premiums.
- High-risk jobs (e.g., construction workers, tradespeople) have higher premiums.
If your job involves both manual and office work, check with your insurer to see if classifying yourself under the less risky portion of your role can lower your premium.
5. Maintain a Healthy Lifestyle
Your health significantly impacts your premium. Factors that increase costs include:
- Smoking (can increase premiums by up to 50%).
- High BMI.
- Chronic health conditions.
Tip: If you quit smoking for 12+ months, you can apply for non-smoker rates, reducing your premium.
6. Take Advantage of Tax Relief
In Ireland, you can claim tax relief on income protection premiums at your marginal tax rate (20% or 40%).
Example:
- If your premium is €100 per month, a 40% tax relief reduces the actual cost to €60 per month.
- You can claim this relief via Revenue.ie (myAccount section).
7. Increase Your Waiting Period Gradually
If you’re just starting your policy, you might opt for a shorter waiting period (e.g., 13 weeks). However, as your savings increase, you can review your policy and extend the waiting period to reduce your premiums.
8. Opt for Reviewable Premiums
There are two main types of premium structures:
- Guaranteed premiums: Fixed for the policy term but tend to be more expensive.
- Reviewable premiums: Cheaper initially but may increase over time.
If affordability is your main concern, a reviewable premium policy may be a better short-term solution.
9. Compare Providers and Seek Expert Advice
Not all insurers offer the same rates for the same coverage. Shopping around and comparing quotes can lead to big savings. A financial advisor can help you:
- Find the most cost-effective policy.
- Identify unnecessary extras that increase costs.
- Ensure you’re taking full advantage of tax relief.
Final Thoughts
Income protection is an invaluable safety net, but it doesn’t have to break the bank. By adjusting your waiting period, cover amount, policy term, and lifestyle choices, you can significantly reduce the cost of your premium while still ensuring financial security.
If you’re unsure about the best options for you, consult a financial expert who can tailor a policy to your budget and needs.
