Income Protection vs Life Insurance: Which One Should You Prioritise?
Choosing between income protection and life insurance can be tricky, especially when budgeting is tight. The right option depends on your personal situation—but this breakdown will help you make an informed decision.
When Income Protection Is More Important
Income protection is usually the top priority if your financial wellbeing depends heavily on your ability to earn.
You may want to prioritise income protection if:
You rely on your income to cover rent/mortgage, bills, childcare, or other essentials
You don’t have much in savings or a financial buffer
You’re self-employed or don’t receive full sick pay from your employer
You’re younger (statistically, you're more likely to suffer an illness or injury than die before retirement)
You have dependents, but would still face financial strain if you're alive but unable to work
Statistically, you're far more likely to be temporarily out of work due to illness or injury than to die before retirement. Income protection helps cover this more probable risk.
When Life Insurance Is More Important
Life insurance becomes essential when others rely on you financially in the event of your death.
You may want to prioritise life insurance if:
You have financial dependents (a partner, children, or other family members)
You have a mortgage or debts that your loved ones would need to repay
You want to cover funeral costs or leave a lump sum to your family
You're the primary earner in your household and want to protect your family's future
Life insurance provides a safety net in the worst-case scenario, offering your loved ones financial protection and peace of mind.
Best Approach: Cover Both Risks If Possible
For most people, the ideal strategy is to have both types of cover, as they protect against two very different risks:
Income Protection: Replaces your income if you’re too ill or injured to work
Life Insurance: Pays a lump sum to your family if you pass away
Together, they create a comprehensive safety net—helping you stay financially afloat in both life-altering and life-ending scenarios.
If You Can Only Afford One…
Here’s a helpful rule of thumb based on your life stage:
Single with no dependents? → Prioritise income protection
Have kids or a partner relying on you? → Prioritise life insurance, but add income protection when feasible
🇮🇪 Bonus Tip for Irish Residents: Tax Relief on Income Protection
In Ireland, income protection premiums qualify for tax relief at your marginal rate—up to 40%. This significantly lowers the real cost, making income protection more affordable than many people realise.
For example, if your premium is €100/month and you’re on the 40% tax rate, your effective cost could be just €60 after tax relief.
Need Help Choosing the Right Protection?
At Financial Health, we help clients across Ireland find the right balance of life and income protection based on their stage of life, income, and family needs.
✅ Tailored advice for your situation
✅ Compare leading Irish insurers
✅ Maximise tax savings