Archive for the ‘income payment protection’

Income payment protection insurance is a way to protect your finances against you losing your income due to accident, sickness or involuntary unemployment. Should this happen to you, the policy will pay out a tax free cash sum every month for up to 12-24 months, leaving you free to focus on getting better or finding a new job.

Benefit eligibility usually kicks in from 30 to 90 days following unemployment or illness, with some insurers back dating the claim to the first day of unemployment or incapacity.

Income payment protection is part of the payment protection insurance (PPI) family. The product itself is fairly easy to understand. It is intended to provide monthly income support to help sustain the insured. Maximum coverage typically allows for payment of up to 50 per cent of the insured’s normal monthly job income, though this varies among the different providers.

Consumer awareness of the benefits of payment protection insurance is on the rise thanks to many factors. Among the primary reasons for increased awareness has been negative publicity tied to mis-selling practices. Citizen’s Advice, a leading consumer advocate group, submitted a super complaint to the Office of Fair Trading (OFT) in 2005, alleging several specific unethical selling practices used by payment insurance sellers.

Regarding packaging of products, the group noted that many lenders were pressuring customers into buying the insurance. More unscrupulously, some would bundle the insurance premiums into the loan repayment to hide the expensive costs. Some sellers have even sold the payment protections to ineligible part time employees and retired people. These people would pay for premiums but could never receive payouts.

As a result of the allegations, the OFT and Financial Services Authority (FSA) both conducted investigations of the payment insurance industry. The FSA used fines and sanctions to penalize sellers it felt were engaged in inappropriate selling activities. The OFT appointed the Competition Commission to further explore the industry for consideration of regulations or other techniques to improve the consumer experience and already positive changes have been made.

This means that consumers now have more awareness of what to look for when buying their insurance as well as where from. Certainly while they have been exposed to the dark side of the income payment insurance industry, they have also become much more knowledgeable about the products and industry itself.

Consumers are now more cautious when approaching lenders who have backed off a bit from pushy tactics. They are also more aware of the great payment cover insurance options available through independent insurance specialists such as the ethical BritishInsurance.

Simon Burgess from the company says: “The high profile that the PPI industry has seen over recent years, which has not always been positive, means that consumers now have more awareness and choice when buying their cover. Bought properly, income payment protection insurance can replace a lost income at a difficult time, meaning people will not fall further in to debt or suffer financially if they are made redundant or become too ill to work”.