A guide to explaining income protection to clients

Many things in life are more important than money. Yet, money is indispensable in helping us achieve our goals and provide for family. This is why our monthly income is so important – it enables us to pay for everything: food, your home, monthly bills, and of course your family. In fact, like most people, your income is the foundation that your daily life is built on.

Worryingly, losing our income due to illness or injury could put all our financial goals at risk. This is where income protection comes in, it provides a financial lifeline when it is needed most. But how can we explain income protection to clients and advise them on what they really need?

In its basic form, income protection is a type of insurance cover that pays your client an amount of money (an income) every month that they are unable to work due to illness or injury. Effectively it helps to replace the salary that they no longer get.

While they’re healthy, they pay a premium every month, or each year if they prefer. If they are unfortunate enough to fall ill or become injured and are unable to work during the term of their plan, they receive a monthly income until they are well enough to work again. However, income protection covers more than this monthly income; Zurich’s product for example offers valuable additional benefits, such as early intervention services.

Does your client need income protection?

Basically, if your client has an income that they or their family rely on, and they do not have any income protection cover in place, the answer is likely yes. Yet unfortunately, clients are often unaware of how quickly they can run into financial uncertainty when they can no longer generate an income. So, it is worth asking your clients a few questions to get a good view of the protection they already have in place.

Firstly, if your client is employed, how long would their employer pay them if they are off sick? This timeframe can be shockingly short – it can be as brief as 2-3 months, sometimes even less.

Secondly, ask them if they have a staff income protection plan in place – if they do, that's great. But unfortunately, many Irish businesses don’t offer this type of staff benefit, so it’s up to your client to protect themselves.

Of course, if your client is self-employed, they don’t have an employer to rely on, so the need for some form of income protection is even greater.

Illness or injury can strike at any age and for any length of time – at Zurich, over 30% of our income protection claims are paid to people under 40, and over 60% of our claims are paid to people under 50¹. Income protection is the protection policy our clients are most likely to claim on – and when they do claim, claims are regularly paid for multiple years. Some claims have been active for over two decades².

How much income protection does your client need?

How much income your client needs to protect depends on their personal financial circumstances. This is why personalised financial advice is key to the right cover and as their financial advisor you are the best person to provide this.

There are a number of factors you could address.

1. How much does your client need each month to maintain their way of life?

Does your client have a clear view of their budget? You could help them by going through a budget planner to work out what they need each month to survive and what disposable income they have available. There are several free resources available to help your client. Our budget planner can help your client visualise their budget. When looking at their required income, do also consider their future spending. Savings for future goals such as their children’s education, or their personal retirement, will also be at risk when your client loses their income and will need to be considered.

2. Is your client eligible for State illness benefit?

If your client is an employee and eligible for the State illness benefit, which is equal to €244 per week in 2025³, these maximum personal rates roughly translate into just over €1,000 a month. This amount will hardly cover their monthly bills, but it does offer some protection.

3. Does your client have savings?

Savings alone usually do not provide an adequate alternative solution. Building a personal safety net takes time, and being unable to work for a prolonged period can be costly. More often than not, savings are earmarked for important financial goals, such as funding their pension or paying for their children’s education. Relying on these funds in the event they are unable to work could jeopardise those goals.

If your client has some savings set aside for a rainy day, this may allow them to choose a longer deferred period (the time between when they become unable to work and when their monthly payments start). This means their monthly premium will be lower, as your client is able to assume more of the risk.

4. Does your client have a partner with a regular income?

The extent to which your client's income contributes to their family income may affect their reliance on it and their need for coverage. However, often, losing one source of income can severely impact a couple’s standard of living, and people tend to overestimate their ability to cut costs. Additionally, their partner’s income is not guaranteed; they may also lose their ability to provide an income in the future.

Is there an upper limit to income protection?

There is an upper limit to the amount a client can insure. Your client can only take out Income Protection cover of up to 75% of their earnings. If they are an employee and eligible for the State Illness Benefit, which is equal to €12,688 per annum (€244 per week) in 2025, they need to take this into account. If they are self-employed, they may not be eligible for the State Illness Benefit, so they may choose to insure the full 75% of your annual income.

How are premiums and claim payments treated by Revenue?

The tax treatment of an income protection policy depends on whether the policy is taken out by the employer (executive) or by your client in person (Personal) and on who pays the premium.

If your client takes out personal income protection:

• Premiums qualify for income tax relief at the marginal rate, but they are not exempt from PRSI (social insurance) and USC (Universal Social Charge). An income tax relief limit of 10% of their total income is applicable. If the client’s employer pays the premium, the premium is an allowable deduction for the employer and gets treated as a Benefit-in-kind for the employee. The employee can claim income tax relief within their 10% limit. Any premium over the 10% limit is taxable as if it is normal pay. USC is still applicable.
• Claim payments are made to the individual by the insurer through PAYE (Pay As You Earn) as deemed emoluments from employment. These payments are subject to the marginal rate income tax and to USC, where applicable.

If your client has an executive income protection policy:

• Premiums are treated by Revenue depending on who pays the premium. If the contribution is paid by the employer, there is an allowable deduction for the company, and no Benefit-in-kind for the employee. If the premium is paid by the employee, there is an allowable deduction at the source for income tax purposes, but they are not exempt from PRSI and USC. An income tax relief limit of 10% of their total income is applicable.
• Claim payments are made to the individual by the employer through PAYE. The payments are made after tax, USC and any other relevant deductions.

Can your client increase their cover as their life circumstances change?

Yes! A lot can happen between the day your client takes out income protection and the day they need to make a claim. They might get married, have a child, or receive a promotion. This is why Zurich’s policy includes a “Guaranteed Insurability Option”^4. This means that they can increase their coverage amount when their life changes due to specified life or work events, without needing to answer any questions about their health.

The most worthwhile financial conversation you may ever have

At Zurich, we believe that having a conversation about income protection may be the most worthwhile financial conversation you may ever have. The value of financial advice makes a real difference in this area. In the past decade, we’ve seen a significant switch in the way general insurance is bought, but the same cannot be said for protection. In 2023, around 92% of income protection and 82% of critical illness premiums from new sales in the UK were generated through intermediaries⁵. This implies that the need to have human protection conversations is as relevant as ever, which provides an opportunity for financial advisors to make a real difference.

Our new income protection quote calculator is now live. This user-friendly tool provides a quick way to get an indicative quote, allowing you and your clients to easily explore different income protection options.

Sources:

¹Zurich, 2024

²Zurich, 2024

³Citizens Information, 2025

⁴Full details of this option can be found in your Policy Document.

⁵Association of British Insurers, 2024