What is income protection insurance

Life is full of surprises – good ones and unpleasant ones. More often than not, you will find yourself in a state of unpreparedness in facing tough challenges like suffering from an ailment or accidentally meeting an injury. Income protection is a unique scheme of insurance that helps you to secure yourself against any financial difficulties that may crop up at such times. When you purchase one of these insurance schemes, you secure an alternate source of income, which is up to 75% of your present income. There are no complicated medical examinations and evaluations required, and you can book it online through the website of the insurance company.

There are several options available from the schemes of an income protection insurance policy. You can choose from among various periods like six months, 12 months and 24 months; this refers to the duration of time for which you wish to secure yourself with an alternative income. So if you were to suffer from an ailment or meet with injuries of any kind that renders you unfit for work there will be no worries about the home supplies and bill payments of your regular lifestyle. Income protection not only helps you to maintain the cash flow coming but also recuperate from your ailment completely stress-free.

Income protection insurance is available within a waiting period of your notification with your insurance company. This varies between companies – for some it may be a wait of 14 to 30 days while in some cases the wait maybe for 90 days. Before the purchase of your policy, you must ask all necessary questions about availability of cash every month and the waiting period before it can be initiated. The limit of your policy coverage will determine the amount you need to pay for the premium payments. Every income protection plan will, however, give you the added benefit of increasing or decreasing the coverage amount.

IPI (Income Protection Insurance), also known as PHI (Permanent Health Insurance), is a type of insurance policy designed to protect the income of wage earners who are unable to work, either temporarily or permanently, due to accident or illness. Policies provide a tax-free benefit to replace the income of workers who become ill. The start of the benefit may be deferred. This is often done if the employer is obliged to pay sick pay for some weeks or months. IPI benefits will be continued until return to work, retirement or death.

IPI polices are designed to protect against loss of income due to illness or accident. The state specified level of sickness pay, Statutory Sickness Pay (SSP), and the social security funded Employment and Support Allowance (ESA) are both considerably lower than average income, so most wage earners will be considerably worse off financially if they become ill and unable to work. Taking an IPI policy is one way to make up the shortfall in income.

IPI does not provide cover against loss of income due to unemployment, so some form of protection such as Mortgage Payment Protection Insurance (MPPI) may also be appropriate to complement the IPI policy.

An employer is obliged to pay Statutory Sick Pay (SSP) for the first 28 weeks of an employees illness, but the rate is quite low compared to the average wage. Some employers make generous provision for sick pay, possibly paying the employee at full pay for some time, and then a half-time for a further period. When taking out Income Protection Insurance, it is possible to defer the payments until after the sick pay from the employer has run out. Deferring payments in this way can substantially reduce the premiums charged for the policy.

Policies such as IPI require some definitions of the levels of incapacity and sickness required before the benefit can be paid out. ADL, or Activities of Daily Living, is the highest level of disability, indicating that the person is not able to carry out a specified number of day-to-day activities, such as washing themselves, climbing the stairs, etc

There are usually three levels of cover provided against the inability to work because of illness. Firstly, any work, meaning the person is so incapacitated that they cannot perform any work. Secondly, suited work, meaning that they can perform some work, but not of the type for which they are suited by their education level and training. Thirdly, own work, meaning that they cannot perform their regular job, but could perform other work for which they are suited.

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