Income protection insurance is a type of life insurance. However, instead of paying out when you die, it pays out if you are unable to work because of an injury or illness while employed.

Income protection insurance can replace up to 75% of your annual earnings (less income from other benefits or protection plans) after a "deferred period" of 13, 26, or 52 weeks. You decide this period when you take out your plan, as well as the term of the plan.  

When you take out income protection insurance you will decide the benefit period, which is the term of your cover. If you are making a claim, you will receive your claim until you return to work or until the end of the plan term. A financial advisor can help you decide the best plan term for you. 

Note that if you become unemployed then your cover will end immediately.  

Income protection insurance is an excellent safety net for you and your loved ones in the event that you can't work while employed due to injury or illness. It can provide financial peace of mind by giving you a steady income stream to help pay housing costs, bills, and any other necessities. 

Irish Life advisors say that your income (and future earnings) is your biggest asset - protecting it should be the cornerstone of any sound financial plan. 

You cannot insure more than 75% of your income. The benefit should be set at a level which leaves you no better off than if you were receiving an income. You are able to opt for indexation on your policy, which will increase your cover in order to mitigate inflation. 

No. Income protection only pays out if you are still employed, but unable to work. If you are made redundant, you are unemployed and ineligible for income protection insurance.

If you are receiving an income protection claim, then you will pay income tax on the income you receive. However, income protection premiums (the money you pay to the insurance provider) are eligible for income tax relief at your highest rate of income tax.  

This means that if you are a 40% taxpayer, you can claim back 40% of the cost of your income protection premium. This tax relief must be claimed directly from Revenue.