Net monthly cost of income protection after tax relief, and net benefit after tax on claim.
Net monthly cost of income protection
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Monthly tax relief on premium
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Net monthly benefit on claim
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Annual premium cap (10% salary)
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Benefit as pct of salary
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Your breakdown
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The most underused tax relief in Ireland
Income protection premiums qualify for income tax relief at your marginal rate, limited to 10% of your earnings. This means a higher-rate taxpayer paying 200 euro per month in premiums pays an effective net cost of just 120 euro, because the state contributes 80 euro through tax relief. Yet many Irish workers either do not have income protection at all or do not claim the relief on their premiums. Revenue does not apply this relief automatically: you must claim it on your Form 11 or through a Revenue myAccount adjustment.
The policy is valuable because employer sick pay rarely lasts more than a few weeks or months, and social welfare illness benefit provides only a basic income. Income protection fills the gap for a serious or prolonged illness. The typical policy pays from a deferred period (often 13 or 26 weeks, after employer sick pay ends) until age 65 or until you return to work. Premiums depend heavily on your age, occupation, and the deferred period chosen.
Worked example: 60,000 euro salary, 100 euro monthly premium
Salary 60,000 euro. Monthly premium 100 euro. Annual premium 1,200 euro, which is 2% of salary, well within the 10% cap of 6,000 euro. Tax relief at 40%: 480 euro per year, or 40 euro per month. Net monthly premium cost: 60 euro. Monthly benefit set at 3,750 euro (75% of 5,000 euro monthly salary). If a claim arises, the 3,750 euro is taxed as income. At a combined rate of 52.1% the net monthly benefit after tax is approximately 1,796 euro, which compares unfavourably with the 60 euro monthly cost. That is the core value proposition of income protection: 60 euro per month buys protection against a potential loss of 1,796 euro or more per month.
Group income protection and sole trader considerations
Many larger Irish employers offer group income protection as a benefit, which usually requires no underwriting and has lower premiums than individual policies. If your employer provides this, check whether you are enrolled and what the cover level and deferred period are. Sole traders and the self-employed must buy individual policies, which are underwritten based on health history. The premium is fully deductible as a business expense in the accounts, not just from personal income, which can make the relief mechanism work slightly differently for the self-employed compared with employees.