When we meet prospective clients, many already understand that financial planning includes pensions, savings, investments, and estate planning. However, one thing that’s often overlooked is financial protection. While most people insure their homes, cars, and even pets, many forget to protect what truly matters, their income and their family’s financial future. Protection planning means preparing for the unexpected: illness, injury, or death. These are difficult topics, but essential to address, as they can significantly impact your ability to work and provide.

Financial protection is the foundation of a strong financial plan. It ensures that if the worst happens, your loved ones are financially secure.

What is protection planning?

Protection planning involves a range of insurance options designed to safeguard your income and provide financial support during life’s most challenging moments. Statistically, you are more likely to be diagnosed with a serious illness than to die during your working life. In fact, figures from the CSO, HSE, Irish Cancer Society, and Irish Heart Foundation show you’re twice as likely to suffer a serious illness before age 65 than to die. This is why income protection and specified illness cover are so important.

Specified Illness Cover

Also known as Critical or Serious Illness Cover, this pays a tax-free lump sum if you’re diagnosed with a specified serious illness, typically conditions like cancer, heart attack, or stroke. Serious illnesses can prevent you from working, and a lump sum at that time can help pay for everyday expenses and medical bills, allowing you to concentrate on getting better. This cover isn’t just for income earners; it’s also recommended for stay-at-home parents and caregivers.

Income Protection

If you can’t work due to illness or injury, income protection helps replace your salary, up to 75% of your annual earnings (minus any other benefits). You choose a deferred period (between 4 and 52 weeks) before payments start, with longer deferral generally lowering the premium cost. Premiums qualify for tax relief at your marginal rate, making this cover both practical and tax-efficient.

Life Cover

Life insurance pays a tax-free lump sum if you die during the policy term, offering vital support for your family. There are several types:

• Mortgage Protection: Designed to match your mortgage balance as it decreases. It’s usually the most affordable option and pays directly to the lender in the event of your death.
• Level Term Cover: Offers a fixed lump sum or income for a set term, with premiums that remain the same.
• Whole of Life Cover: Pays out whenever death occurs, as long as premiums are paid. This is ideal for those wanting to leave a financial legacy, cover funeral expenses, or help with inheritance tax.

Most policies allow optional features like Indexation, which increases benefits annually with inflation, and a Conversion Option, which lets you extend the term without further medical checks (though the cost reflects your age at conversion). Many also include Terminal Illness Benefit, which pays out if you’re diagnosed with a condition expected to cause death within 12 months and often provide limited cover for children.

Business Owner Insurance

Business owners often overlook their own protection needs. If you’re a key person in your company, your absence due to illness, injury, or death could impact the business significantly. Executive Income Protection works like standard income protection but is paid for by the business on behalf of a director or employee. It’s tax-efficient, with premiums treated as allowable business expenses and offset against corporation tax.

How much cover do I need?

There’s no one-size-fits-all approach to protection planning. The right level of cover depends on your personal circumstances, goals, and family needs. That’s why it’s so important to seek professional advice tailored to your situation.

The benefits of protection planning

Protection planning brings peace of mind, knowing that you and your loved ones are financially secure if life takes an unexpected turn. As with all aspects of financial planning, it’s essential to review your protection regularly to ensure it keeps pace with changing financial circumstances, goals, and market conditions. By doing so, you’re not just reacting to the future, you’re preparing for it, ultimately securing long-term financial stability.

Aaron Cunningham, Wealth Manager

This is a Marketing Communication.