To many people, the monthly wage packet is a virtual guarantee – it is the basic method of paying bills, keeping the roof over your head and the sole funding method for the food on the table. But incomes are often more fragile than many people think and can sometimes be taken away by unfortunate occurrences like accidents and illnesses. An envelope containing a notice of redundancy is also a risk, particularly in a more uncertain economic climate, and this leads some people to take out income payment protection insurance as a safety net.
This type of cover can also be known as payment protection insurance, or simply PPI. It is sometimes also wrongly confused with income protection insurance, which is a type of product involving a longer pay out period and which does not cover someone if they become involuntarily unemployed. Income payment protection insurance is more short-term and is designed to help someone continue to pay bills and other commitments if they suddenly lose their income through no fault of their own.
In exchange for a regular premium, an insurer will pay a monthly lump sum to a policyholder who makes a successful claim. The cash is tax free and arrives direct to the person’s bank account to be used however they see fit – it might go towards credit card bills, loan repayments, or even the monthly food bill while they either battle to recover or seek a new job.
Such policies do not cover 100 per cent of a person’s income, but a significant slice of it – how much will be decided when the policy is applied for, although many offer around 50 per cent. For how long the insurer pays depends on the wording of a policy – although 12 to 24 months is the usual scale of limits, or until the policy holder finds work or becomes well enough to return to their former job on full pay.
Besides general income payment protection products, there is also mortgage payment protection, designed to help with monthly mortgage payments in the event of a crisis, and loan protection is designed to help with credit cards and similar debts.
Although the products themselves might seem straightforward after a little research, there is also the question of where to get cover from. Banks and lenders often offer up mortgage and loan protection when lending money. Most big-name high street insurance companies also offer these products, but there is a third, sometimes cheaper, method in the form of more independent specialists, such as British Insurance. Company managing director Simon Burgess says: “Income payment protection insurance is a broad product that need not come with a broad price. Firms like British Insurance can provide quality protection at a cost more people can afford thanks to our policy of shunning over-inflated commission payments.”
Related Posts