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What
are the special features of UK income protection insurance? |
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The following may not apply
to each and every policy on the market - the following guidelines should be seen
as features that are often typical of UK income protection insurance. It is always
important to understand the specifics of individual policies.
- Income protection insurance is also sometimes referred to as 'payment protection
insurance', 'unemployment protection', or simply 'IP'. It can also be referred
to as 'permanent health insurance' or 'PHI'.
- Income protection insurance ensures that you will still receive a liveable
income if it happened that you were unable to work due to accident or ill health
resulting in loss of income.
- It is important not to confuse income protection insurance with 'family income
protection'- a type of insurance that would provide your dependents with an income
should you die within the term.
- You do not need to be a homeowner to be covered by income protection insurance.
- You need to be in permanent employment, and have been for at least 6 months,
in order to qualify for income protection insurance.
- Income protection benefits are payable directly to you and can be used for
any purpose as you see fit.
- UK income protection policy benefits can be used to pay off your mortgage
but you will find that premiums for mortgage protection insurance are generally
lower.
- Income protection insurance can cover you for loss of income for up to 75%
of your income.
- The amount of income benefit that you receive usually remains level over
the term of the policy, although it is possible in some instances, as an optional
extra, to request that payments increase in sync with inflation.
- Once you have made a claim under income protection insurance you are free
to make a separate and new claim once you have been back in work for a consecutive
period of time as specified by your insurance company.
- Income protection insurance will cease in event of any of the following circumstances:
the policyholder's death, the policyholder's retirement or reaching of legal retirement
age, the policyholder no longer continues to be in permanent residence in the
UK, Channel Islands or Isle of Man, the policy is cancelled by either the policyholder
or the underwriter, the policyholder ceases to keep up premium payment.
- The payments that you receive from income protection insurance are tax-free.
- Insurers will usually insist on setting a prefixed limit to the amount of
benefits you will receive, which you will agree to when your policy is set up.
Normally this will be a period of either 12 or 24 months.
- Your income protection policy has no cash value and cannot be cashed in at
any point in time.
- You can specify the amount of time for which you require your income protection
insurance policy, whether it is for a certain number of years, until retirement,
or for the whole of your life.
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