Bridging and protecting the Income Gap:

Income protection for the self-employed and freelance workers;

As a result of the ever-evolving demands of the global economy and fed by technological developments, the labour market is more dynamic than ever. Employee turnover has risen,the average duration of employment at a company has dropped from 12.6 years in 2001 to 5.9 years in 2021. Lifelong employees are no longer the norm. Whereas many highly skilled workers used  have the security of a permanent contract, now fixed-term contracts or even ‘gigs’ are on the rise as new generations of workers enter the workforce. Research shows that 72% of millennials would like to eventually become Self-Employed and now that Zoomers (also known as Generation Z) are entering the workforce the landscape is due to change again. Zoomers are digital people who studied at home from a young age during  Covid years.

While working for yourself provides freedom and flexibility, it does not provide any financial security. When a self-employed worker becomes ill or injured and is unable to do their job, their source of income may dry up.

Provided that they have paid sufficient PRSI contributions, Self-Employed people are nowadays entitled to Social Welfare in the form of an invalidity pension, but this form of support only covers long-term sick pay.

One must be off sick for 12 months before being able to apply and then must prove that they are unable to work for 12 more months, this can be quite difficult.

In other words, Self-Employed workers cannot rely on the State to protect their income. On top of the very limited income protection that the State provides, Self-Employed workers are not covered by employers’ insurance and often have not taken out a personal policy, causing a significant Insurance and Income Protection gap.

Why should you consider  Income Protection

• Illness and injury can happen to anyone. No matter how small the chance of illness or accident seems, the danger is always present. Young people also get sick.
• State income support for Self-Employed workers is very limited. Self-Employed workers are not covered at all during the first 12 months of their illness, the maximum personal rate provides a gross weekly benefit of €225.50, potentially topped up with €161.10 if you have an adult dependent and a maximum of €50 for underage children. These benefits will be taxed by Revenue.
• Few have enough savings to bridge the Income gap. According to research by the Central Bank of Ireland, the average household has a savings buffer that would last 7.5 months when their source of income dries out, around 1 in 6 households have no savings at all.
• Many Income Protection claims are paid out over several years – most self-employed people are unlikely to be able live on savings for such a long stretch of time.

Five steps to creating your own income protection plan.

Choose how much of your income you want to protect. You can cover up to 75% of your earnings (excluding Benefit In Kind) less State Illness Benefit.

Choose when you want your payments to start. There is an initial waiting period, we call it the deferred period, at the start of your claim. You can choose how long this period is i.e. 4, 8, 13, 26 or 52 weeks.

Choose the type of premiums you want to pay, you can choose from two types of premiums:

• Guaranteed premiums – the amount you pay doesn’t change as long as your benefits stay the same.
• Reviewable premiums – your premiums stay the same for the first five years of your plan. We review your premium on the fifth anniversary and could increase it, reduce it or keep it the same.

Choose when your plan will end. This is the age at which your plan finishes.

You can pick any age between 55 and 70 years. Choose whether to keep your premium and benefit the same or add an annual increase. You can keep the same premium and same income throughout your plan.

Or increase both your premium and your benefit each year by selecting the indexation option.

You can also choose an escalation option which allows your benefit to increase by 3% each year while the Insurance Company are paying your claim.

No Self-Employed Person is the same, nor are their protection needs – that’s why Frank Ryan Financial Services provides you with several options to build a policy around your needs

Contact Frank Ryan Financial Services on 087-2557448 or by E-Mail-info@frankryanfinancial.com