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Income Protection Insurance will give you cover should you be out of work due to sickness or redundancy. Income Protection Insurance or IPI can help you plan for the unexpected and can provide vital financial cover to help protect you and your dependents by providing a regular income.
Why Use Income Protection Insurance?
IPI policies were formerly called Permanent Health Insurance (PHI), can help you though a potentially difficult time by offering regular tax free financial aid in either weekly or monthly payments.
After the deferred period has passed which will be agreed upon with your insurer, your benefit will become payable when you are no longer able to work. It is also important to note, that your insurance company cannot cancel or refuse to renew your policy, so long as you continue to pay the premiums. There are also optional extras such as wavering premiums, which effectively pays the insurance premium for the days/weeks you are ill even when your policy is ongoing.
Restrictions Affecting IPI
There are a number of restrictions that can affect a policyholder’s eligibility for income protection insurance such as:
- If you become unemployed for a reason other than illness or an accident.
- Benefits are not payable for accidents or illness as a result of drug or alcohol abuse, criminal acts, intentional self-harm, wars or pregnancy.
- Benefit sums will have limits as to not exceed your employed monthly wage as not to reduce the incentive to return to work once your health recovers.
- If you change occupation (or unemployment) the policy may become invalid, or the life policy may require the premiums to be changed to reflect the new risk.
Why have income protection insurance?
Income protection insurance is designed to replace an individual’s income with a monthly payment if they are unable to work because of accident, sickness or unemployment. The advantages of income protection can include:
- Cover for up to 70% of an income
- Cover for any outgoings
- No need to rely on savings or government benefits
- Monthly payment for a fixed period or until return to work or retirement age is reached
Income protection insurance is generally considered to be a must-have for the self-employed who would not have enough to live on if they are unable to work because of ill health or an accident. For employees, the need for this sort of insurance depends on what the employer provides in terms of sick pay and/or retirement benefits if an employee is unable to carry on working. Employers are not obliged to pay employees if they are unable to work in these situations. Some may pay a full or partial salary for a fixed period but this varies from employer to employer.