Types and Variations of Income Protection Insurance

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A number of Income Protection Insurance types and variations are available if you’€™re unable to work due to sickness or injury. Income Protection Insurance, formerly known as permanent health insurance, is an insurance policy that pays benefits to policyholders who become debilitated due to an accident or illness. This can help ensure that you will continue receiving financial aid despite not having an income for a certain amount of time.

The premiums that you will have to pay for income protection insurance will be determined by a number of factors, particularly the length and type of coverage. In order to avoid paying for too much insurance that you don’€™t need, it helps to take note of these different types and variations to help you in choosing just the right amount of coverage at the most reasonable price.

Types

You can choose from different types of IPI policies with varying durations that would best fit your needs.

Long- term income protection- this type of policy disperses benefits until death, a fixed age, or until you return to work. This information is underwritten at the time of application which means you know precisely what your coverage is from day one.

Short- term income protection- unlike the long- term policy, the short- term income protection has a fixed minimum payout period of between one and five years.

Guaranteed income protection- your premium stays the same throughout the policy term and will only go up if coverage is increased.

Age- related- this policy is suitable for people with high- risk jobs. In this type of policy, you can start off cheaper, however, the premium goes up every year as you get older.

Variations

Increasing Income Protection Insurance- unlike the fixed- benefit policy, the increasing IPI policy will not be affected by inflation and therefore has an advantage longevity wise. In this type of IPI, the benefits will increase by a percentage agreed upon by both the policyholder and the insurance company over a specified period of time, however, premiums will usually increase as well.

Renewable Income Protection Insurance- as the name implies, this type of IPI provides the policyholder a right to renew the policy at a set number of years. Benefits are usually based on prevailing premiums for a person of the policyholder’€™s age and occupation. Initially, premiums are cheaper than that of fixed policy, but will eventually increase with each renewal and as the policyholder ages.

Group Income Protection Insurance- may be offered by employers to their employees but will expire if the employee terminates services with the employers.

Reviewable Income Protection Insurance- this type of policy will have the same or similar terms as that of a fixed policy, however, the premiums are reviewed by the insurance provider after a set period, typically every five years, with the premium likely to be increased based on its rates regardless of the policyholder’€™s health or claims. Premiums tend to start off cheaper than with fixed policies.

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