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Income Continuance Plans

What is the position;


Key Personnel are vital to the ongoing development of the business.


As a Self-employed Controlling Director/Partner/Sole Trader, you are not entitled to any assistance from the State in the event of inability to work through Accident, Illness or Disability.


In the event of long-term absence, a slowdown in business and business development can occur:


Upsetting of solution solving/ orders / cases for existing clients, which may be difficult for other   associates or/and support staff to fulfil.


Possibility of slowdown in new contracts.


Strain on cash reserves to meet the commitments of salary and benefits to the individual involved.


Hiring of a competent temporary replacement during this period can be difficult - as well as costly.


The longer the absence of the Key individual - the greater the change of direction of the business.


Significant financial obligations and overheads still need to be met.


Change of focus from business concentration to personal concern on the part of associates for the individual can have knock-on effects, internally and externally.


There may be a difficulty to obtain extended credit facilities or re-structure financial commitments.


The repercussions vary from business to business in the event of a long-term absence of a Key person. The usual solutions are:


Cash / equity reserves

Extended Credit terms

Business Protection Plans


Adequate Business Protection Plans may appear a costly option in the short term if they are not called upon. By converse, they can also prove to be most cost effective and lucrative solution in the long term when they are called upon. In much the same way that a business would insure against Fire or Theft, insuring against long absence of Key personnel can be viewed with at least the same importance. After all, many businesses will recover from a fire but few will prosper with the long-term absence of a Key individual.


The broad outline of an Income Continuance (PHI) plan is as follows:

A policy is put in place on behalf of an individual and premiums are paid toward the policy.

Should the individual become a long-term absentee from work due to an illness, accident or disability within the terms of the policy, the policy provider begins paying out an agreed replacement income.

This is paid out on a monthly basis after the waiting time of 3, 6 or 12 months (“deferred period”) depending on the policy chosen.

Should claimant be hospitalised, after the first 7 days, they can benefit per day in hospital for up to the next 12 weeks. The benefit re-commences at the end of their deferred period.

While the policy is paying out, the premium cost is waived. When the individual returns to work, the policy stops paying out and the premiums recommence as before agreed.

The policy will continue paying until the individual returns to work or reaches the end of the chosen policy period, usually the retirement age, if they are unable to return to work within the agreed terms. 

The premiums paid on the policy qualify for tax-relief for businesses (no BIK) or individuals. The payments paid out qualify for tax treatment under PAYE.





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Peter Reilly t/a Peter Reilly Financial Services is Regulated by the Central Bank of Ireland.