A Guide to Income Payment Protection Insurance
Income payment protection insurance is an often confused insurance product that is part of an often misunderstood and undervalued portfolio of products known as payment protection insurance (PPI). Income payment protection provides invaluable cover that pays benefits to people who become unable to work due to involuntary redundancy, illness, or accident. Unlike another product that income payment is sometimes confused with, its benefits are paid out over either a 12 to 24 month period depending on the policy terms and conditions.
Income payment protection insurance is sometimes confused with income protection insurance. Income protection is more of a long-term product that covers incapacity only. It has a higher premium cost but pays benefits up to retirement in some situations. This is quite different than the nature of income payment protection and the portfolio of payment insurance products that are temporary unemployment assistance plans.
Income payment protection does not replace the entire income lost during periods of temporary inability to work or involuntary unemployment, but it does cover a significant portion. The purpose of income payment insurance is simply to help sustain people through periods of unemployment because there are limited options available to those who rely on monthly income for expense requirements. Certainly, State assistance is often very hard to come by and even if you are eligible for government benefits, the amount you will receive may not, in most cases, be enough to allow you to service all your essential outgoings every month, still leaving you with financial worry every month.
There are three common types of payment protection that make up this umbrella of products along with income protection insurance. Along with income payment protection insurance, there are mortgage payment insurance and loan payment insurance products. The core benefits and events covered by each are the same, but their purposes and some of the minor features of each do offer some moderate distinction.
Mortgage payment protection insurance will help homeowners cover their most important monthly debt obligation. Homeowners must keep up with their mortgage obligations to avoiding having their homes repossessed. Mortgage payment cover is designed to offer assistance with mortgage payments during temporary displacement. Commonly sold in combination with loans by banks and high street lenders, the products are more recently being acquired in greater numbers by homeowners through independent payment protection specialists such as the ethical British Insurance, often at up to 40 per cent less.
Loan payment insurance is very similar to mortgage payment over, but its purpose is a bit broader. With credit card and loan debts a real worry to the many Brits who have these forms of borrowing, a consistent income is relied to meet their monthly payment requirements. Loan payment cover is designed to help cover monthly debt payments plus provide a modest income supplement for expenses. As with the other products, it does not replace full income, but it covers a significant portion. Similar to the mortgage protection, loan protection is routinely sold in combination with consumer loan products. This packaging process has come under intense scrutiny in recent years thanks to consumer advocate groups like Citizen’s Advice.
Citizen’s Advice recently led a super complaint to the Office of Fair Trading (OFT) charging some banks and lenders with using mis-selling to sell expensive premiums to unwitting consumers. Much of the complaint stemmed from the packaging process of loans and insurance products. Some lenders coerced borrowers into taking on insurance protection under the guise that the loan required insurance protection in order to get approved. Others deceptively packaged the insurance premiums into the loan repayment costs and make note of it only in the fine print of disclosure documents. This helped sellers hide the expensive nature of their products by spreading the premiums over the course of the loan.
Along with these allegations, the group also charged that some sellers were selling their plans to those who would be ineligible to claim such as people with pre-existing medical conditions, retired people, and part time employees. All of these groups of people are in most cases ineligible to collect benefit payouts because of the exclusions of payment cover plans. The products are intended to protect full time employees. Yet, in the past, some high street lenders and banks knew this yet sell the loan payment, mortgage payment and income payment protection insurance plans to these customers anyway.
The OFT and the Financial Services Authority (FSA) both got involved in industry investigations following the complaint. The FSA imposed severe fines and sanctions on institutions it found to be using improper selling methods. This has helped reduce instances of mis-selling somewhat among banks and High Street lenders, but online lenders are beginning to take up some of the same tactics. The OFT appointed the Competition Commission to further investigate the industry and they await their findings in early 2009.
The positive news is that the negative publicity surrounding the protection insurance industry has educated the consumer on payment protection and income insurance industry. Consumers have long been unknowledgeable about the payment insurance industry. Now, more consumers understand some common mis-selling tactics, realize the benefits of payment protection, and more importantly, recognise that independent standalone providers such as British Insurance offer the best access to great payment protection at low rates.
British Insurance have a solid reputation for credible selling tactics and customer service as well as award-winning cover. They have empowered consumers with choices in the payment cover marketplace that they have not had from traditional sellers. This has given rise to more consistent consumer use of payment protection. Currently, only one in three homeowners’ carries protection, but about 60 per cent of new homeowners’ have been acquiring it.
Whether payment insurance takes the form of income protection or income payment protection, mortgage insurance, or loan insurance, the important thing is that Brits take the necessary steps to protect themselves through temporary job loss. Thanks to independent providers, consumers can now secure themselves at a reasonable cost.
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