Six reasons to consider this insurance
A guide to income Insurance
Protection of your income is something you may not have thought about – or maybe have even been aware that you could do. However, income payment protection insurance (or, for the purposes of this article, Income Insurance for short) is a form of short-term financial security to protect people temporarily displaced from work due to accident, sickness, or involuntary redundancy.
It is often confused with income protection, a product with similar terms and names applied to it, but that has very different benefits. Payout of benefits from a covered event under an Income Insurance policy usually kicks in from 30 to 90 days after cover is initiated. Benefits are paid out over 12 to 24 month periods as outlined by the individual plan, usually with monthly instalments that are tax free. Income protection, on the other hand, tackles the financial ramifications of incapacity and has benefits that are longer-term, have higher premium costs, but provide coverage up to retirement at times.
Income insurance is designed to provide a portion of the normal monthly income for the insured worker who experiences a covered event. Maximum cover is usually up to 50 per cent of the normal monthly income of the insured. Many consumers rely on the protection in order to meet their monthly expense requirements if their income is lost from a job.
Income insurance protection is one of three common types of insurance protection classified under the umbrella of products known as payment protection insurance. The other common covers are mortgage payment protection and loan payment protection. All three insurance products offer the same core benefits and plans, but there are some slight differences in their purposes and benefits.
Income Insurance – Quote and Apply
Mortgage payment cover is intended to help homeowners maintain their monthly mortgage payments during short-term unemployment. Coverage for the mortgage insurance is generally available for up to 75 per cent of normal income, or 1,500 pounds, whichever is lower. The idea is that it pays the monthly mortgage when the insured person loses income. Many consumers use this protection as a way to secure their homes from loss. Mortgage payment insurance is often sold in combination with mortgage products by banks and lenders. This has led to some questionable selling tactics by some large banks and High Street lenders, and more recently, some online lenders.
Loan payment protection insurance is the third type of payment cover. This protection offers the broadest coverage, but again, its benefits are very similar to the other portfolio products. Loan payment cover is designed to meet 100 per cent of the monthly debt obligations of the insured person. There is also an opportunity for a 25 per cent of income addition for other expense requirements. It is a great way to maintain good credit, and hold on to secured assets if a job loss occurs. Protection is typically available for up to 75 per cent of normal income, or 1,500 pounds for loan protection also. Also, as with mortgage payment protection, loan payment cover is often sold in combination with other debt products. This has contributed to some of the mis-selling practices used by some.
Currently, only about one in three British homeowners is covered by one of the payment protection insurances. Heightened consumers awareness and the expansion of independent providers and online specialists have made more people aware of the benefits of payment cover. This is evidenced by surveys that shows about 60 per cent of new homeowners are obtaining one of the payment protection products.
One of the leading contributors to growing consumer awareness has actually been negative publicity for the payment protection industry. For years, large banks and High Street lenders dominated the payment cover industry. They often package their insurance covers with loans. This is fine in itself as a business practice. The techniques used have come under fire in recent years, however. Some lenders have pressured borrowers into taking income insurance coverage under the premise that the loan required the insurance. Others have more deceptively built the expensive premiums into the loan repayment in order to hide the true costs from borrowers. This has lead to some borrowers making thousands in premiums that they were not aware of or did not realise they could have avoided. Some income insurance sellers have even sold the products to ineligible customers such as retirees and part time employees, who could never receive benefits.
The Citizen's Advice consumer advocate group called the mis-selling practices into question when it filed a super complaint with the Officer of Fair Trading (OFT) on behalf of consumers. It charged that the deceptive and unethical mis-selling tactics were harmful to payment protection and consumers. As a result, the Financial Services Authority (FSA) conducted an investigation and has fined and sanctioned many large institutions for their practices.
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Perhaps the greatest result of the publicity was that it brought to the attention of consumers the great benefits of buying income insurance and payment protection insurance from a standalone insurance provider. Independent insurance specialists are focused on providing customers the best insurance products with the best value. They maintain relationships with most of the leading income insurance providers in the market. This allows providers to have access to the best products and rates that consumers can find.
The best advantage of income insurance providers is that they typically offer premiums that are 40 to 80 per cent cheaper than what banks and High Street lenders offer. This creates a much better value proposition for consumers looking to protect themselves and their families from lost income. The State is involved very little in providing short-term unemployment for Brits. More and more, people are starting to recognise they must look out for themselves and their own financial security and not rely on the Government alone.
Ideally, payment protection coverage would never be utilised. However, with low rates available from an independent provider, more people should take advantage of the security it offers. Income insurance, mortgage payment protection and loan payment protection are all great options.
