Table of Contents
You’ve worked hard to build your business, keep clients happy, and maybe even support your family. But what would happen if you couldn’t work due to an illness or injury?
Unlike employees, there’s no sick pay or company safety net when you’re self-employed. You are the business. So if you can’t work, you might not earn. That’s where income protection comes in, and it could be one of the most important types of cover you ever take out.
What Is Income Protection?
Income protection is an insurance policy that pays you a monthly income if you’re unable to work due to illness or injury. It’s a policy designed to help you pay your bills, such as your mortgage, household bills, groceries, and other daily expenses.
While you focus on recovery, income protection gives you the financial support you need to stay afloat and avoid dipping into savings or falling behind on payments.
Are Self-Employed People Eligible for Illness Benefit?
Most self-employed people in Ireland can’t get Illness Benefit because they pay Class S PRSI, which doesn’t qualify for it. Illness Benefit is mainly for employees who pay Class A or Class H PRSI.
One exception: Share fishermen and women paying Class P PRSI may be eligible for it for up to a year.
If you’re self-employed and get sick or injured, you might qualify for other supports like Disability Allowance or Invalidity Pension, but only in certain cases. These are for people with long-term, severe conditions that make working impossible, so not everyone will be eligible.
That’s why it’s so important to have an income protection policy in place to make sure you can still pay your bills if you can’t work due to illness or injury.
Why Do Self-Employed People Need Income Protection?
There are 352,300 self-employed individuals in Ireland, each relying on their ability to work to generate income. Unlike employees who may receive sick pay or other supports, self-employed people don’t have a built-in safety net if they’re unable to work due to illness or injury.
When you’re self-employed, you’re your own safety net. If you stop working due to an illness or injury:
- Your income might stop.
- Your business might still bring in a little at first, but eventually it will take a hit.
- Savings? Sure, but how long would they last?
With so many people now working for themselves, income protection isn’t just a good idea — it’s an essential part of protecting your finances and your future.
How Does Income Protection Work for the Self-Employed?
Income Protection is designed to give you financial support when you can’t earn a living due to illness or injury. Here’s how it works, step by step:
- You choose how much of your income you want to protect (up to 75%).
- You choose your deferred period — how long you wait before payments begin (standard options are 4, 8, 13, 26, or 52 weeks).
- If you become ill or injured and can’t work, you submit a claim to your provider.
- Once your deferred period ends, you’ll start receiving monthly payments — these continue until you’re well enough to return to work, you retire, or your policy term ends.
What Insurers Look For in Ireland
When you apply for income protection as a self-employed person in Ireland, insurers assess more than just your age and health. They want to understand the financial reality of your business because the policy is replacing your income, not your revenue.
Here is what they typically review:
- Trading history: Most insurers want to see at least 12 months of self-employment, with some preferring 2 to 3 years of tax returns.
- Proof of income: Form 11 tax returns, Notice of Assessment, and recent accounts are usually requested. They use net taxable income, not gross turnover.
- Occupation class: Desk-based roles (accountants, designers, consultants) are cheaper to insure than manual or high-risk roles (tradespeople, drivers, construction).
- Medical history: Existing conditions, BMI, smoking status, and family history can affect the premium or result in exclusions.
- Financial underwriting: For higher levels of cover, insurers may ask for additional financial documentation to make sure the benefit does not exceed 75% of your actual income.
The stronger your documentation, the smoother the application and the better the terms.
Real Scenario: A Self-Employed Tradesperson Earning €55,000
Meet Mark, 38, a self-employed electrician earning €55,000 net per year. He has a young family and a mortgage. He has no sick pay and no other insurance in place.
Here is how his income protection policy could work:
- Cover chosen: 75% of income, so €41,250 per year (€3,438 per month)
- Deferred period: 13 weeks (he has roughly 3 months of savings as a buffer)
- Benefit term: Until age 65
- Estimated monthly premium: Around €60 to €90, depending on health and provider
- After tax relief at 40%: Net cost is closer to €36 to €54 per month
What happens if Mark cannot work? After the 13-week deferred period, he would start receiving €3,438 per month tax-free at the point of payment, though income tax and USC apply once received. That income continues until he recovers, retires, or the policy term ends. Figures are illustrative. Actual premiums depend on individual circumstances.
You are the business. If you cannot work, your income stops. Get a personalised income protection quote and see how affordable cover really is.
How Much Does Income Protection Cost?
The cost of income protection can vary from person to person because it’s tailored to your unique situation. Providers look at several factors to calculate your premium, including your age, overall health, and what kind of work you do.
The more income you want to protect and the sooner you want payments to start if you make a claim, the higher the cost may be. Here’s what affects the price:
- Your age
- Health and medical history
- Occupation (some jobs are riskier than others)
- How much of your income you want to protect
- Your deferred period (the waiting time before payments start)
What Is a Deferred Period?
A deferred period is the waiting time between when you become unable to work and when your income protection payments begin. It’s a key part of your policy, and it affects how much you’ll pay for cover.
The longer the deferred period you choose, the lower your monthly premium will be — but it also means waiting longer before you start receiving payments. It’s important to pick a period that matches your financial cushion or savings. Standard deferred period options include:
- 4 weeks
- 8 weeks
- 13 weeks
- 26 weeks
- 52 weeks
If you have a financial buffer (e.g. savings), a longer deferred period might suit you. If you need money quicker, a shorter one is better (but costs more).
Tax Treatment of Income Protection in Ireland
Income protection in Ireland is one of the few insurance products that qualify for tax relief, which makes the real cost significantly lower than the sticker price.
For sole traders with a personal policy:
- Premiums qualify for tax relief at your marginal rate, up to 40%.
- You claim the relief through your annual Form 11 tax return.
- The maximum premium that qualifies is 10% of your total income.
- When a claim is paid, the benefit is subject to income tax, USC, and PRSI, just like your normal earnings.
For company directors with an executive policy:
- The company pays the premium and treats it as a business expense, reducing corporation tax.
- The premium is not a benefit in kind for the director.
- Claim payments go to the company, which then pays them to you through payroll, with tax deducted in the normal way.
Key point: Tax relief is not applied automatically. You must claim it. Many self-employed people leave this money on the table every year by forgetting to include it on their return.
How Much Income Protection Do You Need?
How much income protection you need depends on your lifestyle and monthly expenses.
Ask yourself: What are your essential bills each month — like rent or mortgage, groceries, utilities, and loan repayments? Do you have dependents relying on your income?
You can protect up to 75% of your annual income, up to a maximum of €262,500 per year.
Does Income Protection Cover Mental Health?
Yes, most income protection policies cover mental health conditions.
Mental illness is now one of the top reasons people claim income protection. According to the Aviva Protection Claims Report 2024, 30% of all income protection claims were for psychological reasons, ahead of orthopaedic issues (24%) and cancer (20%). The report also showed that 33% of women claimed mental health-related conditions, compared to 27% of men.
Some providers, like Aviva, also offer mental health support, including counselling at no extra cost as part of their policy benefits.
Why Income Protection Claims Get Declined
Income protection has one of the highest payout rates in Ireland, with most providers paying out over 90% of claims. Still, some claims are declined, and the reasons are usually preventable.
The most common reasons for declined claims:
- Non-disclosure at application: Failing to mention a medical condition, medication, or lifestyle factor when applying. Insurers check medical records at claim stage.
- Not meeting the definition of disability: Policies pay out when you cannot perform your own occupation. If you can still do your job in some capacity, or return to it part-time, the claim may be reduced or declined.
- Pre-existing conditions: Claims related to conditions that existed before the policy started, if not properly disclosed, are typically rejected.
- Claim made within the deferred period: If you return to work before the deferred period ends, no benefit is paid.
- Substance misuse or self-inflicted injury: Most policies exclude these outright.
- Incorrect occupation class: If the job you do is different from what you declared, the insurer may reassess or decline.
The fix: Be fully honest at the application stage, keep medical records up to date, and review your policy if your role or health changes.
Executive Income Protection vs. Self-Employed Income Protection: What’s the Difference?
If you’re self-employed or running your own company in Ireland, it’s important to pick the right type of income protection, and it depends on how your income is structured.
Personal Income Protection
Personal Income Protection is designed for sole traders or self-employed individuals who do not receive a salary, as employees typically do.
Key features:
- The policy is taken out in your own name.
- Premiums are paid personally (not through a company).
- You can claim tax relief at your marginal rate (up to 40%) on your premiums.
- If you need to claim, the benefit is paid directly to you, after tax and USC.
- Ideal for people who don’t run their business through a company or pay themselves a PAYE salary.
Executive Income Protection
Executive Income Protection is designed for company directors or business owners who pay themselves a salary through their company.
Key features:
- The company takes out and pays for the policy on your behalf.
- Premiums are treated as a business expense so that the company can claim tax relief.
- If you claim, the income is paid to the company and then passed to you through payroll.
- It can also cover pension contributions (up to 35% of salary or €50,000, whichever is lower).
- Best for directors and key employees.
Which One Should You Choose?
- If you’re a sole trader, go for Personal Income Protection.
- If you own a limited company and take a salary, consider Executive Income Protection for tax efficiency and broader benefits.
If you’re not sure which income protection option is right for you, our financial advisors can help. They’ll look at your specific setup and tax situation and guide you towards the policy that fits your needs and budget best.
Protect your income before something stops you from working. Get a personalised quote in under 2 minutes.
FAQ - People also ask
No. Self-employed workers paying Class S PRSI are not entitled to Illness Benefit. The main exception is share fishermen and women paying Class P PRSI. For everyone else, income protection is the practical alternative to sick pay.
In almost all cases, no. Class S PRSI contributions do not qualify for Illness Benefit. You may qualify for Disability Allowance or Invalidity Pension in serious long-term cases, but these are means-tested and limited in scope.
The standard Illness Benefit is not available to self-employed Class S contributors. Invalidity Pension became available to the self-employed in 2017, but only for permanent incapacity. Income protection remains the most reliable financial safety net.
Premiums typically range from €30 to €120 per month, depending on age, occupation, health, cover amount, and deferred period. After tax relief at 40%, the net cost can be significantly lower.
Income protection is a private contract and is not affected by most state benefits. Disability Allowance is means-tested, so a private income protection payout could reduce or cancel your entitlement. Always check with a financial advisor.
Get an Income Protection Quote
As a self-employed individual, you’re already used to planning ahead, and having a financial safety net should be part of that plan. Income protection is an essential piece of your financial toolkit, giving you peace of mind if illness or injury ever stops you from working.
We know it’s a big decision, and the options can feel overwhelming. That’s why speaking with one of our financial advisors can make all the difference. They’ll help you find a plan that suits your needs and budget. When you rely on your income to keep everything going, protecting it isn’t just smart — it’s essential. Get an Income Protection quote today!
We provide various financial services, such as life insurance, income protection, mortgages, serious illness cover, pensions, financial planning, health insurance, and savings & investments.
Share this post
All our content has been written or overseen by a qualified financial advisor. However, you should always seek individual financial advice for your unique circumstances.
