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The benefits of income protection

Last update - Thursday, January 29, 2009, 18:09 By Metro Éireann

You And Your Money by Ademinyi Adelekun

It’s no longer news that the global economy is experiencing great difficulty, and the fact that Ireland’s economy is facing serious challenges is now well known and felt by almost every resident of the country – many of them in the most direct way possible, as the rate of unemployment has risen to unexpectedly high levels.
The financial challenge for those recently laid off is significant. There may be an entitlement to unemployment benefit, but this is only meant to assist those taking it for the short term until they find new employment, which may be easier said than done. For people used to a better lifestyle than the ‘dole’ can support, the challenge is at its greatest.
But for those who have planned ahead, considering that a potential recession could result in the loss of their job, the situation is less bleak. Preparing for just such an eventuality of the main elements of a good financial plan, which is all about looking into the future to identify the challenges that may arise, and using one’s present income to build safety measures to ensure that those challenges, when they arise, are met without much stress.
Such safety measures are many and varied, but they are usually grouped into two main categories. The first are those measures you have decided to take up yourself; that is, you bear the risk on your own. The measures within this category would include taking out personal savings and investments which you can fall back on during difficult times.
The second category includes transferring the risk to an organisation – an insurance company. This is done by making an agreed contribution (or ‘premium’) at regular intervals to a general pool managed by the insurer, for which the organisation will ensure that – if and whenever you are met with a difficult situation covered under your policy – you will be paid to lessen the financial impact of a sudden loss of income. This kind of insurance policy is known as ‘income protection’.
This advice may be too late for those who have already lost their jobs and hence their sources of income. But the opportunity and scope is there for those who are still in stable employment to do something towards protecting their income. On the brighter side for those who may have lost their jobs, there is no doubt the economy will soon turn around for the better..

Ademiniyi ‘Niyi’ Adelekun is the principal at Alpha Royal Financial Services in Galway

This article is a general description of situations and circumstances. Please consult a financial adviser for personal advice that would take your specific situation and circumstances into consideration

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