Albeit given a fresh lease of life under the new name of long-term Income Protection Insurance, IP is what was once referred to as PH. Or rather, Permanent Health Insurance.
Acronyms aside, it’s very much a case of out with the old and in with the new, as the insurance industry has long held the opinion that this arm of the business needed a shot in the, well, arm.
Hence ushering in the dawn of the newly energised Income Protection Insurance scheme, which is (thankfully) there to draw on in the unfortunate event of the policyholder being unable to continue their employment as a direct result of work-compromising injury or recurrent illness.
But what you really want to get to the bottom of is just what Income Protection Insurance affords you, the customer.
Well, we can confirm that IP typically delivers should the policyholder suffer long-term and/or debilitating injury and illness, and will continue doing this until such time as the claimant is either: in a position, health-wise to return to their employment, reaches retirement age or (and a little more extreme, admittedly) passes away.[/nav-text]
Worth noting that in many cases insurance providers offer alternative short-term Income Protection Insurance policies too, which aren’t quite as far-reaching yet are tailored around the individual’s needs, and are obviously available at a lower price.
Generally-speaking Income Protection Insurance isn’t in the habit of paying out if you happen to experience redundancy, yet having said that will – in the majority of cases – promote what’s dubbed ‘back to work’ help if you’re off sick.
Now before many of you start shouting the odds about your private medical insurance schemes and payment protection insurance (all well and good in principle, may we add) neither of these alternate guises provide you with the necessary ring-fencing of your main income source. Period. Whereas Income protection Insurance does just that.
Not only does it shield your income – or rather, provide fiscal continuity if you’re incapacitated – it does this on a tax-free basis too.
For the uninitiated, individual Income Protection Insurance pay outs are calculated on a percentage of your pre-injury/illness earning power, normally in the region of between 50% to 70%.[one-half]
Do bear in mind though, IP policies only compensate customers after a pre-agreed period of time has elapsed, typically ranging from 1 to 12 months after you register your claim.
The reasoning behind this is you may well be entitled to statutory sick pay from your employer immediately after you express your intentions to stop working.
What’s more, the longer the deferral period, the greater the premiums are reduced, with habitual deferral periods usually negotiated around the 13 to 26 week mark on average.[/one-half] [one-half-last] [box color=”grey”]
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Income Protection Insurance Trumps Private Medical and Payment Protection Insurance in Our Books
There’s also a strong likelihood that insurance providers wont renege on their Income Protection Insurance pay-out policies, as ably supported by the following evidence which confirms that in the year 2012 some of the largest Income Protection Insurance-offering companies on the market – including the likes of Aviva, LV, and Friends Mutual – granted and settled between 88% and 98% of claims actioned by their customers.
Of course there will, as always, be some exclusions regarding Income Protection Insurance qualification and aspects which you should be mindful of from the outset.
For instance some policies won’t necessarily cover all types of illness, while hereditary illnesses might also fall foul of qualifying criteria, which are generally referred to as pre-existing medical conditions.
Insurers will make no bones about scrutinising your family medical history prior to ratifying any policy with a customer, to rule out anything which might make bring into question liability issues with both parties. Meanwhile it’s also worth noting that some Income Protection Insurance providers may rule out potential claimants on the grounds that they could undertake alternative means of employment which wouldn’t compromise the individual’s specific injury or illness.
As well as disclosing everything about any existing medical conditions, the Income Protection insurance provider will need to determine whether or not you count extreme sports amongst your hobbies and interests section of your CV.
If, for example, you list bungee jumping or base jumping, be prepared to have your application turned down for obvious reasons. By the same token, some insurers might take a dim view of heavy smokers, drinkers or drug takers, so honesty is always advised before agreeing to any contractual obligation between yourself and the policy provider.
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