What is Covered by Your Income Protection?

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Also known as permanent health insurance, income protection insurance is designed to replace a portion of your income-usually 50%-60%- if you are unable to work because of disability or illness. You will receive tax-free, monthly benefits until you are able to get back to work or until you reach the retirement age. Typically though, most policies limit payouts to five years only.

Generally, IPI is most recommended for those who are self-employed, and thus have limited resources to tide them over when they lost their earnings. If you are a regular employee, on the other hand, whether you need IPI depends if you have other benefits to depend on, such as your sick pay or retirement benefits in case you are unable to work.

While IPI can really give you some cushion when you have to stop working, it pays to know that there are three certain classifications of how “unable to work” you are, and it varies from policy to policy.

Inability to Do Your Own Job

In this scheme, your policy will pay out the benefits if you are unable to do your own job. This means you will still receive the benefits even if you are well enough to perform other kinds of paid work.

Inability to Do Your Own or Similar Job

In this type of policy, you will be paid only if you are unable to perform your own job and any other similar tasks based on your experience and qualifications.

Inability to Do Any Kind of Paid Work

In this IPI policy, you will only receive your insurance benefits if your illness or disability is serious enough to stop you from doing any kind of paid work. Of course, this type of cover is the most difficult to qualify for, so be careful when shopping for your IPI policy.

Obviously, the best cover is the one that pays out benefits if you are unable to do your own job, but it is also the most expensive. Some policies may allow you to make a “partial” or “rehabilitation” payment if you are able to return to your own job, but for a limited capacity.

Meanwhile, some policies might also make “proportionate” payments, which tops up your earnings if you return to a full-time, but a lower-paying job.

What is Not Covered?

  • Preexisting medical conditions or health conditions you’ve had before taking out the policy
  • Alcohol or substance abuse
  • Pregnancy or childbirth
  • Self-inflicted injuries

What is the Deferred Period?

No IPI policy will reward your benefits if you continue to receive your full salary. There’s also a so-called deferred period of about four weeks, which is a period of time that you won’t be paid after you have stopped working. This can last up to 52 weeks, depending on your choice, in order to make your insurance cheaper. It would be wise to set your deferred period for a length of time that you’ll be receiving sick pay from your employer.

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We do not provide any financial advice relating to insurance or other insurance related topics. IncomeProtectionAdvisor help users get a competitive income protection insurance quote. We do this by working with FSA regulated partners who search and compare insurance policies from dozens of UK insurers. The quote you receive will be based on the information you submit to us. Our service is free and you are under no obligation to accept the quote you receive.
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