Income payment protection insurance
Income Payment Protection Insurance from British Insurance
Unless you have a crystal ball, the future can be hard to predict. With an income coming in and a roof over your head, with all the day-to-day concerns to deal with, it's easy to only think from one week to the next and not even consider what might happen in one, two, ten or twenty years. But, your income is not guaranteed for your working life, and it pays to expect the unexpected, with illness, accident, or involuntary redundancy all as possibilities. This is where income payment protection insurance comes in.
A product in the payment protection insurance market, income payment protection insurance is geared to replace your regular income if the unforeseen happens. For a claim to be successful you will have to prove your cash flow has been snatched from you by illness, injury or involuntary redundancy. A monthly sum will then be paid to you, tax free, by your insurer, to be spent on your general outgoings in any way you choose. Think how long those savings would last without a salary – if you have any – mortgage payments alone are likely to gobble them up at speed.
Many insurers aim to provide income payment protection insurance policies that can be continually renewed to provide cover throughout someone's working life. Other features include, age-related policies, which will sometimes deliver discounts to younger applicants. An applicant’s age, job, and gender will also not matter to a few insurance firms giving out this type of cover.
Timeframes and Small Text
As with many payment protection insurance products, income payment protection insurance will not pay out until after an initial period after the successful claim. The length of this will often depend on how much you want to pay for your premium. If you would want your payments to arrive, 30 days after your claim, a higher price is likely than if you wanted them to arrive six months after your claim. Some policies will backdate payments to the very first day you lost your income. As with other forms of payment protection insurance, cover in this sector will command a premium that will go up or down per £100 of income you want to be covered.
So, income payment protection insurance might appeal to anyone with very little or no savings, particularly if they are worried about the long-term security of their current job. Check your health and sickness cover at work as well – ask your human resources department, if applicable, if it doesn't adequately reassure you, extra cover could be the way forward.
A benefit of many policies is also that they can pay out right up until the time you fully recover from your illness or injury or up until the end of the policy's lifetime, which can typically be 12 – 24 months after the first day of your claim. Policies with fixed premium rates for their duration are also options with a lot of providers.
A few of us will assume a loss of income through illness, accident or involuntary redundancy will simply mean we end up using the safety net of state benefits. This is something few people contemplate fondly but are often seen as an adequate last resort to keep going. Not so in many cases. It is very doubtful job seekers or disability benefits will even cover debt for a large portion of people, let alone ensure their standard of living remains the same. An added mechanism will be needed for most of us to be sure of doing this. Otherwise you might find yourself given enough state cash simply to be able to pay for food.
What is Unlikely to be Covered
Moving on to some drawbacks, there are common exclusions as with many forms of insurance. Typically, you will not be covered if you fall ill with a condition you were treated for during 24 months before the start of the policy. Temporary unemployment will also not be covered, and neither will unemployment that arises because a fixed term contract you were on runs out. There will also be a kind of holding period attached to many policies during which you will not be able to make a successful claim on the basis of involuntary employment.
Medical conditions such as disability due to stress or back pain are unlikely to count unless it can be proved by a doctor it is only this condition that stops you being able to work. Injuries caused through self-harm, drug or alcohol abuse, or a suicide attempt are also unlikely to be covered. If you are unable to work due to recovery from medically unnecessary surgery, i.e. cosmetic surgery, you are also not likely to make a successful claim.
Read all the small print before signing on the dotted line so you can take exclusions like this into account. Another thing to think about is the fact the payment protection insurance industry, of which income payment protection insurance is a common product, is still under the microscope from official bodies.
In February 2007 the Office of Fair Trading referred the market to the Competition Commission for an investigation. In the same year the Financial Services Authority fined five big-name high street firms for mis-selling policies, saying they failed to reach standards by being over-aggressive with the selling of such policies. It also said many payment protection insurance policies sold by the firms were overpriced and not suitable for some of the customers they sold them to. The findings of an in-depth review from the Competition Commission are anticipated in 2009.
As with many forms of payment protection insurance, you would do well to shop around before settling on an income payment protection insurance policy. Remember the well-known names are not the only providers out there and there are many specialist providers who deal specifically in this type of insurance who will be able to provide better knowledge and, possibly, a cheaper premium.
