Understanding Income Protection Insurance

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Income Protection Insurance is what you need in order to protect yourself from unknown future events, such as loss of job or simply being unable to work due to sickness and disabilities. Like other insurances, there are certain things you need to remember.

Eligibility

There are a few requirements that you need to satisfy in order to get approved for Income Protection Insurance. You need to be permanently living and working in the UK for at least 16 hours a week, and for any less than that, you need to apply for unemployed income protection instead. Furthermore, you must be at least 18 to 64 years old, as you won’€™t be approved coverage beyond retirement years. Your job must also be permanent and you must have been employed for at least six months.

Types

Short- term income protection- this type of policy will pay out within a period of one to five years, which will be predetermined since the beginning of the contract.

Long- term income protection- unlike short- term protection which pays only for a fixed number of years, long- term protection will never cease until you reach a certain age, death, retirement, or until you can get back to work.

Accident, sickness, and unemployment- this type of cover tends to be cheaper as no full medical underwriting is conducted, meaning you have less certainty if you’€™ll get covered when you start to claim.

IPI for Self- Employed and Unemployed

If you are- self employed, you can still apply for income protection, but the amount of benefits will be calculated differently. If you have a business, your earnings will be determined by the total income of the business less any expenses.

Meanwhile, if you are unemployed or a homemaker, your spouse can apply an additional cover for you, but there’€™s a restriction on the level of benefits you can receive, which is typically around £20,000 annually.

Exclusions

There are different types of exclusions for every policy, but normally, you will not be approved if your job status is not secured, for example, there is an impending unemployment or merger with another company. Furthermore, you might not be given cover if you are pregnant, or have an existing medical condition. Moreover, be wary of these common exclusions which should be known since the beginning of the policy.

  • Any illnesses or risks you already knew by the time the policy is bought
  • Disabilities or illnesses resulting from criminal acts
  • Involvement of drugs or alcohol
  • Accidents or injuries resulting from acts of war, invasion, riots, or terrorism
  • Self- inflicted injuries

In addition, the insurance company may refuse to pay if you failed to mention any relevant information during the underwriting process, either deliberately or accidentally. One commonly left out information is smoking, in the hopes of getting cheaper premiums.

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