Income insurance provides regular income if you cannot work due to illness or disability and continues until you return to work or retire. Income protection insurance is also known as permanent health insurance. Are income protection payments taxable?
Do I really need income protection insurance?
- You are not yet getting income insurance. Some employers offer this as an advantage. In this case, the employment contract, handbook or personnel department will contain detailed information
- Whether you have any other sickness insurance in combination with another insurance policy or with a mortgage that covers a serious illness
- Do you have savings that you can use instead of insurance. However, you need to think very carefully about whether you want to rely on savings. You may not be able to save enough to cover a long period of ill health. And you may face another threat that would take advantage of your savings and not protect you against the disease.
Is income protection insurance taxable?
You can apply for a refund of premiums paid for income protection insurance against loss of income. However, you should also include payments received by income protection insurance as income.
This means that by paying income insurance premiums, you may be entitled to tax benefits. If you have an accident or illness and you are unable to work and successfully apply for income protection insurance and start receiving benefits, you must legally apply for income.
You pay the premiums yourself
If you pay your own income protection insurance contributions, your contributions have already been taxed – i.e. the money you used to pay contributions was automatically taxed after receiving your salary. This means that any payments you receive from insurance coverage will belong to you as you like – no tax.
Your employer pays contributions
If you receive insurance coverage from your employer as part of your income – or if you pay insurance premiums – then tax will be payable on every payment you receive. Your employer may apply for a corporate income tax exemption, and all payments you receive will most likely be taxed.
Income insurance provides regular income if you cannot work due to illness or disability and continues until you return to work or retire. Income protection insurance is also known as permanent health insurance.
The amount of income you can apply for does not replace the exact amount you earned before you had to stop working. You can expect to receive about half to two-thirds of your pre-tax earnings from normal work. This is due to the fact that part of the money will be collected for state benefits that you can apply for and your policy income is tax free.