Income payment protection insurance
Income Insurance from British Insurance
Income insurance is sometimes confusing. The confusion usually stems from names that are used synonymously to describe two types of insurance products. Income payment protection insurance is a short-term insurance that pays benefits over 12 to 24 months to insured workers displaced because of involuntary redundancy, accident or illness. It pays a portion of the normal monthly income, but often does not replace the entire amount. Income protection is actually a longer-term product that pays benefits up to retirement in some cases. It also has higher premium costs.
For many consumers who find themselves unable to work due to redundancy, prolonged illness or accident, income insurance, is the only source of short-term unemployment assistance. What the State does offer in terms of support for people who have become out of work if often every little, so it is up to Brits to protect themselves.
Income payment protection is one of three common types of payment protection insurance (PPI). This is a portfolio of insurance products that offer most of the same core benefits and covers. There are some slight distinctions among the covers in terms of their purposes and some of their features. The other two types of payment covers are mortgage payment insurance and loan payment insurance.
Mortgage payment insurance is very similar to the income insurance payment cover. Its design, however, is focused on helping people meet their most important monthly debt obligation. Homeowners risk loss of their property to repossession if they fail to meet their mortgage debt obligations. This is why payment protection is vital to many people. While mortgage payment does not always cover 100 per cent of monthly income, it does cover a significant portion of it. Mortgage payment insurance is often sold in combination with mortgage products by banks and High Street lenders. It can also assist with mortgage-related costs, such as home insurance premiums.
Loan payment protection insurance is very similar to mortgage payment protection, but again, its purposes and some features are slightly different. Loan payment protection is a bit broader in that it helps cover much of the insured’s monthly debt obligations. Plans also regularly include some modest monthly provisions of income supplements to assist with basic monthly expense requirements. Loan payment cover, as with mortgage payment, is often sold in combination with loan products. This business process of packaging loan and insurance products has been heavily scrutinised in recent years thanks to some common mis-selling practices used by some large banks and High Street lenders.
The Citizen’s Advice, the consumer group, brought a super complaint to the Office of Fair Trading (OFT) on behalf of British consumers in 2005. In the complaint, the group alleged, among other things, that lenders regularly used high pressure or deceptive selling tactics in order to sell insurance to loan customers. Some implied to borrowers that without the insurance protection they would not receive their desired loan. Others use more deceptive practices. Lenders sometimes built payment insurance premiums into the repayment costs of the loan in order to hide just how expensive the premiums were. By spreading the costs over the course of the loan, they are harder for borrowers to spot. The lender simply makes note of the insurance protection in the fine print of disclosures.
Another allegation noted by the group in the complaint related to selling of insurance products to consumers unable to receive benefits. Part time employees, retired people, and people with pre-existing medical conditions are all unable to collect benefits from payment protection. Some insurance sellers sell plans to these groups even though they realise they cannot receive payouts.
As a result of the complaint, the OFT and the Financial Services Authority (FSA) conducted investigations into the payment insurance industry. The FSA concluded their research by fining and sanctioning banks and lenders it found had engaged in mis-selling techniques. The OFT appointed the Competition Commission to perform further research and they are now awaiting the results to decide what action to take.
The bigger result of the publicity surrounding the investigations is that consumers are much more aware of the benefits of income insurance and payment insurance, and how the industry functions. Consumers are starting to realise they have more control over their ability to find good coverage. Independent providers are being utilised because of their ability to provide better products and better rates. Banks and High Street lenders have lost some of their control because consumers are more educated and understand the resources available to them.
Independent insurance providers, historically, offer payment protection at rates that are 40 to 80 per cent less expensive than those offered by banks and High Street lenders. They also are more interested in customer service and maintain a high standard of ethical business practices. Many independent standalone providers are members of industry associations that require members to follow strict codes of business conduct.
Specialist, standalone providers maintain relationships with most of the key insurance providers. This enables them to put together the best collection of payment cover products and rates on the market, Standalone providers regularly advocate for consumers within the provider network to constantly put together the best payment insurance plans and maintain their ability to keep insurance premiums low.
As Brits have become more aware of their power in the payment insurance industry, they have also begun to recognise that the State offers very little to no assistance for short-term unemployment or inability to work. Income insurance and payment protection is up to individuals to provide for themselves. Because of the great rates available through standalone providers, the value of payment insurance is much greater in today’s consumer environment. Whether the payment cover is for income insurance, mortgage insurance, or loan insurance, the level of security the protection provides to the insured and his or her family is high. Many homes have been saved and family financial situations have been guarded because of the benefits of payment cover. Brits need to take a proactive approach and shop around for the right cover for them.
