Is income protection worth the cost?

Is income protection worth the cost?

It pays if your salary is substantially above approx. 26,600 DKK/month (here the unemployment benefits is the ceiling) if you have fixed expenses that you cannot cut and if you do not have a savings equivalent to 3- 6 months' pay. If you earn less than approx. 26,600 DKK, the unemployment benefits already covers up to 90% of your salary after AM contributions, and income protection insurance gives little or nothing.

Is income protection a good idea?

Income protection insurance is a good idea for you with high wages, high fixed costs and small savings. It is a bad idea if you earn close to the ceiling, have a big buffer, or if you are already covered by a collective scheme that covers your needs. Also note that you cannot buy it once you know about a future firing.

At what salary do unemployment benefits reach the maximum?

At a gross salary of about DKK 26,600/month. Unemployment benefits are 90% of your salary after the labour market contribution (8%), and DKK 22,041 ÷ 0.9 ÷ 0.92 ≈ DKK 26,620. Above this salary, benefits cover a smaller share of your salary – this is the gap income protection fills.

How much can I receive from income protection?

You will typically get: (percentage of cover × your salary) − your unemployment benefits, but not more than the amount you have insured. Example: salary 39,000 DKK, 80% = 31,200 DKK, minus unemployment benefits DKK 22,041 DKK = 9,159 DKK/month from the income protection insurance system (example of Socialpædagogerne).

Sources: Socialpædagogerne: Income protection insurance

How does the enhanced unemployment benefit rate affect my income protection?

If you receive the increased rate of up to DKK 26,198 for the first 3 months, the payment from the Income Protection Insurance will typically be reduced during that period because it is calculated as a percentage of the wage minus the daily wage. Topdanmark therefore requires a higher minimum wage (DKK 34,057) if you receive an employment allowance.