When considering income protection insurance it is important that you choose the most suitable form of protection for your needs. There are different forms of cover to protect your income and to cover different events. One pays out over the shorter term in the event of accident, sickness or involuntary unemployment, and the other typically pays out until your retirement age if necessary, in the event of long term illness or accident that prevents you from working.
What is income insurance?
The form of income protection insurance we are looking into here is the shorter term insurance, often known as income payment protection insurance – or PPI for short. A policy is typically taken out to protect against the possibility that you might suffer from accident or an extended illness that leaves you unable to work. It may also protect you against the chance of you being made involuntarily redundant and losing your income. These policies run for 12-24 months, or until you get back to work, whatever event happens first. Do note that there are typically some illnesses that may not be covered in the policy so it is worth checking.
How might the replacement income be used?
When you take out protection you cover up to so much of your own income. If one of the events happens, a claim may be made on the policy. If accepted, the provider pays you a tax free income for up to the agreed period of time, if needed. You may use this income in any way you want. Typically you might use some of it towards your household bills, your food, petrol, or indeed any other repayments and bills that may come into the home.
You may even want to use it to buy new interview clothes – it’s up to you how you spend the payment protection insurance (PPI) monies.
What you need to know about PPI cover
As with any form of insurance, income protection insurance comes with some small print which you may wish to check thoroughly before taking out the policy. An ethical provider makes sure that you have access to vital information so you know what is and is not included in the insurance. For instance, you have to consider that certain illnesses are typically exempt along with any pre-existing illnesses and that redundancy that you were aware of before you took your insurance will be excluded.
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