When you run your own business, you get very good at backing yourself. You’re the one who shows up early, fixes the problems, chases the invoices and keeps the whole thing standing. But there’s a tricky truth that a lot of self-employed people and small business owners don’t like to face: when you are the business, what happens if you can’t actually work?
No employer sick pay. No HR department quietly keeping the wages flowing. If you’re laid up for a few months, the income doesn’t just dip – for a lot of one-person operations, it stops dead. And that’s exactly the gap income protection insurance is built to fill.
Why this hits the self-employed harder
Employees at least have a bit of a cushion. Many get some sick pay from their job, even if it doesn’t last forever. When you’re self-employed or running your own small company, that cushion usually doesn’t exist. The State’s Illness Benefit is there, but it’s a modest flat payment that won’t come close to covering a typical business owner’s outgoings.
Meanwhile, the bills don’t take a break. The mortgage, the rent, the van finance, the kids’ costs, maybe even staff wages or supplier payments – they all keep coming whether you’re at your desk or in a hospital bed. For a lot of business owners, a long illness isn’t just a health crisis, it quickly becomes a financial one too.
That’s the uncomfortable bit. The good news is it’s a very fixable problem, and fixing it is more affordable than most people expect.
What income protection actually does
Income protection is a policy that pays you a regular replacement income if illness or injury stops you from working. It’s designed to cover up to 75% of your earnings, and it keeps paying until you’re well enough to return or until the policy ends – often around age seventy.
It’s worth being clear on what it isn’t, too. It’s not life insurance, and it doesn’t cover you for losing contracts or a downturn in business. It’s specifically about your health stopping you from working. If a bad back, a serious illness or a long recovery keeps you out of action, this is the cover that keeps money landing in your account.
The tax-efficient angle that business owners love
Here’s where it gets genuinely interesting for the self-employed and for company directors, because there’s real tax efficiency baked in.
For individuals, income protection premiums qualify for tax relief at your marginal rate – 20% or 40%. If you’re a higher-rate taxpayer, that’s effectively 40% off the cost of your cover. It’s one of the few insurance products in Ireland that comes with that kind of relief built in.
If you’re a company director, there’s an even tidier option. Under an Executive Income Protection plan, your company can pay the premiums and treat them as a legitimate business expense. And here’s the part people often miss: there’s no benefit-in-kind (BIK) liability for the director or employee where the employer is footing the premium. So the company gets the deduction, and you don’t get stung with a BIK charge for the privilege. For owner-managers, that’s a neat, efficient way to protect yourself through the business.
Getting the deferred period right for your situation
Every income protection policy has a “deferred period” – the waiting time between stopping work and the benefit kicking in. You’ll usually pick from 4, 8, 13, 26 or 52 weeks, and the longer you wait, the lower your premium.
For employees, the trick is to match this to their sick pay. But if you’re self-employed with no sick pay to lean on, you might lean toward a shorter deferred period so the money starts sooner – though that does push the premium up. It’s a balancing act between cost and how long your own savings could realistically keep you afloat. This is exactly the kind of judgement call where a quick chat with a broker pays off, because the right answer really does depend on your own numbers.
What it costs (and what drives the price)
The cost of cover comes down to a few key things: your age, your income, your general health, your occupation, and the level of benefit and deferred period you choose. Occupation matters a fair bit here – someone in a physically demanding trade will typically pay more than someone behind a desk, simply because the risk profile is different.
The honest answer to “what will it cost me?” is that you won’t know until you get a quote built around your actual circumstances. But thanks to that tax relief, the real cost is often a good deal lower than the headline premium, especially for higher-rate taxpayers.
Features worth having on your radar
A few standard features are particularly handy for business owners:
- Premium waiver – you generally stop paying premiums while you’re receiving benefit, so your cash flow gets a break exactly when it needs one.
- Indexation – your cover can rise each year to keep pace with inflation, so the safety net doesn’t quietly erode over time.
- Multiple claims – there’s typically no limit on the number of claims, so recovering and returning to work doesn’t use up your cover.
- Portability – your policy stays with you even if your work situation changes, so a personal plan keeps protecting you regardless of what the business does.
A simple bit of business housekeeping
If you spend any time at all on continuity planning for your business – backups, insurance, the “what if” scenarios – then your own ability to earn deserves a spot on that list. It’s arguably the single biggest risk to a one-person or owner-managed business, and yet it’s the one that most often gets overlooked.
The straightforward way to sort it is to talk to a broker who covers the whole Irish market and can compare the main providers – Zurich, Irish Life, New Ireland, Aviva and Royal London among them. They’ll look at whether a personal plan or an executive plan through your company makes more sense for you, get the structure and deferred period right, and make sure you’re claiming any tax relief you’re entitled to. A good broker won’t charge a fee for arranging the cover either, so getting proper advice costs you nothing.
It’s the kind of job that’s easy to keep parking until “things calm down” – but for a business owner, this is one safety net that’s genuinely worth putting in place sooner rather than later.
If you’d like to explore what income protection could look like for you or your business, take a look at Yourbroker’s income protection page and get in touch for a no-obligation conversation.