Income Payment Protection Explained

Payment protection insurance is an umbrella that encompasses the portfolio of short-term insurances that support temporarily displaced workers. One of these is income payment protection. The core benefits offered by this insurance and the other types, mortgage payment protection and loan payment protection insurance, are very similar. They also provide benefits in the form of 12 to 24 month payouts that kick in after 30 to 90 days after a pre-defined event has occurred. All can insure the standard events of involuntary redundancy, prolonged illness, or accident. They are each intended to support short-term needs. There are, however, some subtle differences in the covers.

Income payment protection insurance is the simplest of the three covers in that it provides a monthly income payment typically up to 50% of the insured’s normal monthly income. Its intention is to help people keep up with their monthly expenses in lieu of lost income. It can be sued for whatever the policy holder wishes, whether it be say to day living expenses, furl bills or loan repayments.

Income payment cover is sometime confused with a longer-term insurance product known as income protection. The confusion comes from their similar names and uses, but the benefits of each are quite different. The income protection is again, more of long-term, as it offers potential assistance up to retirement age. This longer protection period, of course, makes this protection more expensive in terms of monthly premiums.

Income Payment Protection from Burgesses

Loan payment protection insurance is designed to assist the insured usually through 100% payment of monthly debt obligations plus an extra 25% of monthly income provision for expenses. There is a usually maximum allowable coverage of 75 per cent of monthly income, or 1,500 pounds, whichever is lower. Loan payment cover is often sold in combination with loan products by banks and lenders.

Mortgage payment protection insurance is very similar to loan payment protection insurance. It is designed, however, to support the insured’s monthly mortgage obligation, with a maximum coverage defined by the provider. Its general purpose is to help displaced workers keep their homes in the event of sustained job loss. As with loan protection, mortgage payment cover is often sold in combination with mortgage products. This packaging of insurance protection with debt solutions has sometimes been controversial because of mis-selling practices of some leading banks and High Street lenders. Consumers are becoming more aware of the benefits of obtaining mortgage protection on the open market, which has led to an increase in buying.

Income Payment Protection

Until recently, many consumers have been largely unaware of the benefits of income payment protection insurance and payment protection insurance as a whole. In fact, lots of people have not heard of the products; even some people that are covered by them. Much of the confusion with payment cover stems from deceptive selling practices employed by many banks and High Street lenders. These large institutions have long controlled the payment protection insurance industry. Lenders have often packaged their expensive premium insurance products with loans, and used high pressure selling to get borrowers to take it. Others have gone as far as to build in the premium costs with loan repayment costs to hide the expensive premiums. Unwitting borrowers often do not even realize how much they are paying for the insurance.

Recently, the Office of Fair Trading (OFT) and Financial Services Authority (FSA) have been looking into mis-selling within the industry. The Citizen’s Advice, a leading consumer advocate group, brought a super complaint to the OFT alleging the aforementioned selling practices, as well as pointing out that some providers were selling insurance to ineligible customers. The insurance only protects full time employees, but some sellers have been selling to part time employees, retired people, and those with pre-existing medical conditions, all of whom are typically ineligible to collect benefits.

As a result of investigations, the FSA has imposed fines and sanctions on some institutions. The OFT appointed the Competition Commission to further investigate, which could lead to stronger regulations and penalties to clean up the industry. While the penalties have helped reduce mis-selling by some institutions, online lenders have picked up the practice of combining loans and insurances in questionable manners. All of the negative attention has brought to light for consumers the importance of working with a reputable standalone insurance broker.

Insurance brokers specialize in providing insurance products and services to a variety of consumers. They maintain relationships with most of the large insurance providers which helps them gain access to the best products and rates for their customers. Consumers can quickly go to a specialist web site, fill out a questionnaire, and get information on selected products and rates that fit their needs. Brokers have a better reputation for customer service and an orientation for advocating for consumer needs within their provider network. Perhaps most importantly for consumers, broker offered payment protection plans are usually offered at rates that are 40 to 80% less than the expensive bank or lender products.

People need to plan for their own short-term employment needs. Some may have savings put away but those who rely on steady income need financial security of accident, involuntary redundancy or illness occurs. The State offers very little to no assistance. Even those that do receive some type of assistance have to wait months to get it. Income payment protection insurance comes with many great product benefits, not to mention the peace of mind and security it offers. Any of the payment protection insurance cover products can be of great value if obtained through an independent insurance specialist at the right rate and terms. Sadly, and especially in the current economic climate, people must be responsible for themselves and their financial security and taking some form of protection insurance could be the solution.