Claire, Co Dublin
A Most income protection policies provide cover for any illness or injury – including stress and anxiety – that keep you out of work for an extended period, as long your claim is medically supported.
However, such policies typically do not pay out immediately because there is a waiting period – typically called a ‘deferred period’ – before you can claim. Check your policy to see which deferred period you selected; it could be anything from a month to a year, with three months being fairly typical. Longer deferred periods make cover cheaper and often fit with employers’ sick pay. Speak to someone in your HR department to check if that is the case.
‘Do I need life insurance if I already have death-in-service cover through my workplace?’
Q I was about to buy my own life insurance recently but remembered I have a death-in-service benefit through my workplace. Does this mean I don’t need life insurance?
Alan, Co Kilkenny
A Death-in-service (DIS) cover is a very attractive benefit paid for by employers on behalf of their employees. As the benefit is provided through a scheme with a trustee, Revenue allows for as much as four times your salary to be paid out as a tax-free lump sum to your estate after your death. The benefit remains in place for as long as you remain with your employer, and it is paid out regardless of whether the cause of your death was related to your job. Some plans also include a continuing pension for any dependants after your death . Depending on who receives the benefit from your estate, there may be an inheritance tax liability, so it’s best to speak to a tax adviser.
However, there are some differences between DIS cover and personal life insurance: a DIS benefit will typically only be paid out if you die while you’re still working for your employer and most DIS plans have an age limit on cover – usually your retirement age. But with a personal life insurance plan, you can choose how long the plan lasts, the cover is not tied to your employment, and you choose the amount of cover you need. I recommend speaking with a financial broker, who can assess your life cover needs based on your individual circumstances and budget.
‘I’m in my 20s and want to open a PRSA. Should I opt for a the non-standard type if I want more investment choices?’
Q I’m in my 20s and want to open a Personal Retirement Savings Account (PRSA). I think I’ll opt for a non-standard PRSA as I understand I’ll have more investment choices if I do. But are there any other differences between standard and non-standard PRSAs?
Cillian, Cork City
A It’s great you’re starting to plan for your retirement at an early age and a PRSA is a good way to start saving on a regular basis. There are two key differences between these two types of PRSA. A standard PRSA is limited to pooled investments that invest across a range of assets within a fund structure offered by a provider such as a life company. A non-standard PRSA can offer a wider range of investment choices, including pooled funds, company shares, and bonds.
The other main difference relates to fees and charges. A standard PRSA has a cap of 1pc per year on the value of the fund – known as an annual management charge – as well as a cap of 5pc on contributions.
A non-standard PRSA, which can be offered by a wider range of providers including stockbrokers, has no cap on charges.
There are lots of options available in the market, with different charging structures, so I’d recommend you consult a broker to find the option best suited to your needs.
‘I’ve developed long Covid. Is it too late to get income protection insurance?’
Q I’ve been suffering from long Covid for over a year and have been in and out of work as a result. This has been a huge drain on the family’s finances. Is it too late for me to take out income protection insurance?
Noelle, Dublin 8
A I am very sorry to hear that you are suffering from long Covid.
An income protection policy can help alleviate financial concerns that come with being unable to work due to illness. However, given you have a condition that is unfortunately characterised by long-term health problems, it is very unlikely any insurer would offer you income protection as it would be considered an existing condition.
The best time to take out an income protection policy is when you are healthy because, as you know only too well, illness or injury can happen at any time.
Email your questions to: g.monaghan@independent.ie
