Facing redundancy can be a stressful and uncertain time for employees. Questions about finances, job security, and long-term stability arise quickly. One common question among workers in Ireland is: Does income protection cover redundancy?
In this comprehensive guide, we’ll explore how income protection works in Ireland, whether it includes coverage for redundancy, and what other options are available to help safeguard your income in the event of job loss.
What Is Income Protection Insurance?
Income protection insurance is a financial safety net designed to replace a portion of your income if you become unable to work due to illness or injury. It typically pays out a monthly benefit — usually up to 75% of your pre-tax income — until you can return to work or reach retirement age, depending on your policy.
Key Features of Income Protection:
- Replaces income lost due to long-term illness or disability
- Typically pays out after a deferred period (e.g. 4, 8, 13, or 26 weeks)
- Covers up to 75% of your gross salary, less any state illness benefits
- Premiums may be tax-deductible in Ireland
- Payments continue until you return to work, reach retirement age, or the benefit period ends
Does Income Protection Insurance Cover Redundancy in Ireland?
The short answer is no — income protection insurance in Ireland does not cover redundancy or unemployment.
Income protection is specifically designed to provide financial support in the event of illness or injury, not job loss due to economic conditions, layoffs, or company downsizing.
Why Redundancy Is Not Covered:
- Redundancy is not a medical condition and does not meet the criteria for a payout.
- Insurers consider job loss a normal risk of employment, not a health risk.
- Insurance is based on risk assessment, and redundancy is harder to quantify and predict.
What Happens If You’re Made Redundant?
If you’re made redundant in Ireland, you may be entitled to certain statutory payments and social welfare benefits. These options can help you manage your finances temporarily until you find new employment.
Key Redundancy Supports in Ireland:
- Statutory Redundancy Payment: A lump-sum payment from your employer based on your length of service.
- Jobseeker’s Benefit/Allowance: A weekly payment from the Department of Social Protection.
- Redundancy and Insolvency Payments Scheme: Covers outstanding pay or entitlements if your employer cannot pay.
- Community Welfare Services: Additional supports such as Rent Supplement or Exceptional Needs Payments.
Alternative Insurance Options for Redundancy
While income protection doesn’t cover redundancy, there are other insurance products that can help during periods of involuntary unemployment:
1. Mortgage Payment Protection Insurance (MPPI)
- Covers your mortgage payments if you lose your job due to redundancy.
- Often includes a short-term benefit period (e.g., 12–24 months).
- May also cover illness or accident-related work absences.
2. Payment Protection Insurance (PPI)
- Covers repayments on loans, credit cards, or finance agreements.
- Typically includes unemployment, illness, or death.
- Must check for strict conditions, exclusions, and maximum cover periods.
3. Unemployment Insurance
- Some banks and financial institutions offer standalone unemployment insurance.
- Provides a monthly income for a limited period after redundancy (e.g., up to 12 months).
- Often expensive and includes waiting periods and exclusions.
How to Protect Your Income Against Redundancy
While income protection doesn’t cover redundancy, you can take proactive steps to protect yourself financially:
1. Build an Emergency Fund
- Save 3–6 months’ worth of expenses in a separate account.
- Helps cover rent, utilities, food, and other essentials if income stops.
2. Understand Your Employment Rights
- Know your rights regarding redundancy payments, notice periods, and severance.
- Contact the Workplace Relations Commission (WRC) for advice if needed.
3. Review Your Financial Products
- Check if your mortgage or loans include any redundancy protection.
- Consider taking out unemployment insurance if available and affordable.
4. Upskill and Network
- Keep your CV up to date and invest in skills that improve your employability.
- Attend networking events and industry meetups to broaden your career prospects.
What Income Protection Does Cover in Ireland
Even though it doesn’t cover redundancy, income protection is still a valuable product. Here’s what it does cover:
Covered by Income Protection:
- Long-term physical injuries (e.g., back injury, surgery recovery)
- Chronic illnesses (e.g., cancer, MS, diabetes)
- Mental health conditions (e.g., depression, anxiety, burnout)
- Pregnancy complications that prevent working (depending on policy)
Not Covered by Income Protection:
- Redundancy or unemployment
- Pre-existing conditions (unless disclosed and accepted)
- Short-term illnesses (unless policy specifies otherwise)
- Work stoppages due to strikes or company closure
Income Protection vs Redundancy Cover: Quick Comparison
| Feature | Income Protection | Redundancy/Unemployment Cover |
| Covers job loss? | ❌ No | ✅ Yes (if involuntary) |
| Covers illness/injury? | ✅ Yes | ❌ No |
| Payment duration | Up to retirement (depending on policy) | Typically 12-24 months |
| Subject to underwriting? | ✅ Yes (based on health, occupation) | ✅ Yes (based on job security) |
| Tax relief available? | ✅ Yes (up to 40%) | ❌ No |
| Monthly payout | Up to 75% of income | Varies (fixed amount, often lower) |
Tax Relief on Income Protection Premiums
One of the biggest advantages of income protection in Ireland is that it qualifies for tax relief.
- You can claim up to 40% of your premiums back via your income tax.
- This makes income protection more affordable over the long term.
Example:
If your annual premium is €1,000, and you pay tax at the 40% rate, you can claim back €400, making your net cost only €600.
How to Apply for Income Protection in Ireland
If you don’t already have a policy and want to protect your income due to illness or injury, here’s how to get started:
Steps to Apply:
- Contact a Financial Advisor
- They can help you compare policies and explain the fine print.
- They can help you compare policies and explain the fine print.
- Assess Your Needs
- Determine how much income you need replaced and for how long.
- Determine how much income you need replaced and for how long.
- Compare Providers
- Look at premiums, benefits, deferred periods, and exclusions.
- Look at premiums, benefits, deferred periods, and exclusions.
- Complete Underwriting
- You may need a health questionnaire or medical exam.
- You may need a health questionnaire or medical exam.
- Apply for Tax Relief
- Use Revenue’s MyAccount portal or talk to your tax advisor.
- Use Revenue’s MyAccount portal or talk to your tax advisor.
Final Thoughts: Be Informed, Be Prepared
While income protection insurance is an excellent tool for protecting your income due to illness or injury, it will not cover redundancy. Employees in Ireland should be aware of this distinction when planning for potential financial setbacks.
To safeguard your income fully:
- Use income protection for health-related absences from work.
- Consider separate unemployment insurance for job loss.
- Build an emergency fund to help with unexpected events.
- Know your legal rights around redundancy and severance.
Being proactive today can save you a lot of financial stress tomorrow. Don’t wait until redundancy or illness hits to find out what your insurance does—or doesn’t—cover.