We understand the importance of safeguarding your financial well-being against life's uncertainties. Income Protection is an important step to take to ensure financial stability in the face of unforeseen circumstances. Even better is that the premiums paid for an income protection policy are eligible for tax relief at your highest marginal rate, potentially up to 40%, This makes this very important product more affordable than it may seem.
The Importance of Income Protection
Life's unpredictability can pose challenges, but your financial security doesn't have to be compromised. In a nutshell, Income Protection provides a safety net, offering up to 75% of your income (less any illness benefit payable) if you're unable to work due to illness or injury. This support allows you to focus on recovery without the added concern of not being able to meet your financial commitments.
Maximising Tax Efficiency
A significant advantage of Income Protection is the tax relief available on premiums. By claiming tax relief at your marginal rate, you can effectively reduce the cost of your policy, making comprehensive coverage more accessible.
Consider the following examples:
· Example 1: A policyholder with an annual income of €48,000 pays €108 per month for their policy. After claiming 40% tax relief, the net cost is reduced to €65 per month.
· Example 2: Another individual earning €66,000 annually pays €297 per month in premiums. With tax relief, the actual monthly cost decreases to €178.
These examples illustrate how tax relief can make Income Protection a cost-effective element of your financial planning strategy. Remember your income itself is your greatest asset. It is, after all, the one thing that pays for everything else so where would you be without it?
How to Claim Tax Relief
While it may seem daunting the process for claiming tax relief on your premiums is very straightforward. Just follow the steps below using the Revenue Online Services (ROS)
1. Log into Revenue’s myAccount service.
2. Navigate to “Manage Your Tax” and select “Claim Tax Credits.”
3. Enter your premium details under the appropriate section, such as “Health” or “Income Continuance.”
Retain your premium receipts as documentation for your claim.
Tailoring Coverage to Your Needs
Income Protection policies offer flexibility to align with your financial situation. Adjusting elements like the deferred period (that is the time after the event happens and before benefit payments commence) can have an impact on premium costs. For instance, opting for a longer deferred period may lower your premium. So say you have savings put aside that will support you for a time, then this will allow you to balance cost and coverage effectively.
Key Benefits
The benefits that Income Protection offer are extremely important:
· Peace of Mind: Ensures that your and your family’s lifestyle can be maintained during periods of illness or injury when you are not able to work and earn your salary.
· Long-Term Security: Benefits continue until you can return to work, retire, or reach the end of the policy term. Policies tend to offer rehabilitation treatment and part-payment options to help your transition back to work easier.
· Tax Efficiency: Enjoy reduced premium costs through available tax relief. This can make the policy more cost effective.
Taking the Next Step
At Searing Point Wealth Management, we’d be delighted to help you understand how Income Protection can support you and the plan options that suit your individual circumstances the best. Just contact us to arrange a suitable appointment.
