Protection Insurance – are you eligible and when should you
buy?
Protection Insurance, also known as short-term income protection, allows you to
continue paying a range of household bills and loan commitments
should your salary be interrupted due to unemployment, an accident
or sickness.
British Insurance’s Mortgage Protection
Insurance covers your monthly mortgage bill (up to £2000) for
up to a year and is paid directly to your bank or building society
account. Its Loan Protection Insurance will repay up to £1000 a
month and Income Protection £1500.
Income Protection Insurance allows you
to continue paying a variety of bills, such as housing, loan and
utility costs, the monthly food shop, even school fees.
Cover for all policies is usually sold per £100 of benefit and
tends to be capped at 50% of gross monthly income or the maximum
limit, whichever is less.
British Insurance includes carer cover within the unemployment
portion of its policies, so if you’ve lost your income in order to
look after an immediate family member, you’ll be able to claim. Its
Loan PPI also provides life and terminal
illness cover as well as hospitalisation benefits.
As is usual with all insurance policies, there are certain
restrictions, so check the information below, this’ll help you
decide whether you’re eligible to buy.
You should be;
· Aged between 18 and Statutory Retirement Age (if you’re close
to SRA, cover and any benefit payable under the policy will
automatically end when you reach SRA).
· Permanently living and working in the UK.
· In paid employment in the UK for at least 16 hours a week and
eligible to register as unemployed.
· Continuously working for the last six months.
You cannot apply for cover if your work is temporary (including
agency work), casual, seasonal, irregular or for a specific
task.
Despite a commonly-held belief that contract workers and the
self-employed cannot buy PPI, with British Insurance you can,
providing certain policy conditions are met (so check the
appropriate policy wording to ensure you meet the criteria).
Contract Workers
If you’re a contract worker your contract will need to be of a
fixed length and/or been renewed at least once.
You will not be able to claim for unemployment beyond the date
your contract would have naturally expired and non-renewal of a
fixed term contract will not be covered unless specific policy
conditions are met. Underwriters have differing specifications so
always check with your provider, prior to purchase.
For example, some state; ‘if you’ve had a fixed term
contract for less than two years, you’ll only be covered up until
its natural expiry date’. If you’ve held the
contract for over two years or it’s an annual contract that’s been
renewed at least once, you’ll be covered as if you were
employed.
Others require you ‘to be on a renewable fixed term contract
and worked for at least 12 months’.If less than a year, you’ll
only be covered up to your contract’s natural expiry date.
Self-employed
If you are self-employed and want to claim, pay outs will only
be made if your company is wound up by a third party and you’ve
ceased trading through no fault of your own (you can’t just decide
to close the business down). You must file closing accounts
and advise HM Revenue and Customs that you’ve ceased to trade.
The same restrictions apply to the self-employed as those
working for companies – ie you should be a UK resident aged between
18 and Statutory Retirement Age, continuously working for the last
six months and for at least 16 hours a week. If you’ve
gone from employed to self-employed and there’s no break in your
employment, this will be considered to be continuous work.
Take a look at our video
on payment protection for self employed workers.
When to buy
Apply when your job is secure. There’s an
initial exclusion period of 120 days – around four months - which
means you’re not covered for unemployment that results from any
programme of job losses, departmental or company re-structures, or
merger with another company, announced by your employer before or
120 days after your policy’s start date. This may be waived if you
are transferring your cover from another provider.
Why not have a look at our video
on the 120 day exclusion period?
You won’t be refused cover on the basis of rumour or
speculation, but you may be declined if you’ve been made aware of
impending unemployment, or your employer has announced any job
losses, departmental or company restructure or merger with another
company.
Holding down two jobs
If you have two part-time jobs and you lose one, you can claim
on your British Insurance policy, providing the remaining job is
less than 16 hours a week (as this would make you eligible for
JobSeekers Allowance).
However, if each job is for 16 hours a week or more, you’d have
to lose both jobs through no fault of your own in order to claim
(as holding one for 16 hours or more leaves you ineligible to claim
for JSA). This generally applies to most PPI providers, although as
BI always advocates, check with the policy provider first.