Income Protection insurance – A Look At The Idea

The concept of insurance has been there since the time civilization began to take its root, but income protection insurance is rather a modern notion.  The policy is solely meant for the earning members of the society. It is true that most policies, which are sold in the market, are life insurance policies, but in this modern age one needs something more than that and income protection scheme is one of them.

What is Income Protection Insurance –

The words income protection tells a lot regarding the policy. It offers the policyholder protection, just in case there has been a loss of income due to sickness or accident related issues.  However, here is a word of caution for the policyholder. This is not an alternative to unemployment. The policy is certainly not a cover for lost jobs due to dismissal or criminal actions.

http://www.youtube.com/watch?v=PRnnlIAwF18

From Where To Buy Income Protection Cover –

Now the next focus is from where to buy income protection Preexisting Medical Conditions cover. There are plenty of insurance companies selling the policy and with most of them having online presence, locating someone should hardly be a worry.  The quotes or to be precise lower premiums are certainly a criterion. Nevertheless, the record of a particular firm in regards to claims payments should certainly receive focus. After all, the whole issue of buying protection is to receive benefits just in case there is a financial crisis. The amount of benefit too should get proper attention.

Why The Payout Is Limited To 70% Of The Last Income Drawn –

In general, the idea is to encourage the patient to get back to work. However, if the monetary payment exceeds the client’s income, then few will want to go back to work. Hence, on most instances, insurance companies try to curb the payout limit to 70% of the income. One can always do a comparative study of the offers  and then choose accordingly. To get a better deal, one can even consult insurance brokers. They are not attached to any insurance company. Hence, they will certainly offer the best.

What Is Deferred Period –

The deferred period is another area to focus on.  It is the period in between a claim and commencement of benefits. The longer is the period; the lower is the premium to be paid. However long deferred period may create trouble for those with limited saving and hence one should ponder over such points before picking up a income protection insurance.

Income Protection Insurance Provide Benefits Even If The Injury Is Not Work Related

Employer Sponsored Coverage Is Not A Substitute For Independent Income Protection Insurance –

We have all heard about income protection insurance schemes; but very few of us make any concrete attempt to get such coverage. Moreover a large section of American workforce believes that since the employers are bound by state laws to provide compensation in case of illness or injury, they need not buy additional coverage. They however, fail to remember that to get compensation under such schemes the injury or illness has to be work-related and in good many cases they are not.

Indeed, it often happens that the main breadwinner of the family loses his job because of some accident or illness which is not at all work related and when this happens, he/she does not know where to turn to.  One has to keep on paying bills and as the savings dry up that becomes more or more difficult. However, with income protection coverage in place, it becomes least of worries. If chosen with care, such schemes pay as much as 75% of the last income earned in monthly installments; if used prudently, such an amount should meet the requirements adequately.

Income Protection Insurance: Some Salient Points –

It is to be noted that income protection schemes are generally stop gap measures designed to help the incapacitated to lead his life with dignity. That is why it pays only 75% of the last salary drawn. Any higher amount will encourage complacency and the person will never try to get back to work. In fact, most carriers have rehabilitation programs to encourage the insured either to go back to his old job or to find jobs that are suitable for his/her present condition.

One more point to remember is that there are three categories of income protection plans. The long term policies extend coverage until the insured reaches the retirement age. In other words such plans cover the whole of working life of the insured and keep on paying benefits until one reaches 65.  Contrarily, short term plans are designed to provide benefit over a specific period only; such plans are naturally more cost effective. There are also exclusions to look into.  Indeed, before choosing specific income protection insurance, one has to keep a lot of things in mind.

Income Protection Insurance And Its Benefits

Income Protection Insurance And Exclusions –

The concept of income protection insurance is certainly a new idea. This is a policy aimed at protecting people just in case there is a loss of income due to some major sickness or accidents. However, it is important to note that the policy does not cover loss of income due to dismissal or retrenchment. The benefits are payable only if the insured loses his/her income due to disability. Moreover, in most cases, incapacitation due to substance abuse or self-inflected injury is also excluded.

Points To Focus On Before Purchase Of Income Protection Insurance –

1. Nevertheless, in spite of the fact that it does not cover dismissal, it is certainly beneficial for people who have a stable income. Just in case, there is some unforeseen danger in terms of sickness or injuries, this acts as a perfect financial protection. Fortunately, such protection is offered by many well known insurance carriers. One can always do a comparative study of the premiums the insurer charges and the amount offered as benefit. While it makes sense to go for those who offer cheaper alternative, one must also focus on the record of the insurance company in regards to claim payment.

1. The amount of benefit is also an important area of focus. The idea is to get the patient back to work.  Hence, most insurance companies offer an amount, which is lower than the income of the insured person, or else he/she will not want to get back to work. Moreover, such payments are mostly made in monthly installments and this too us an added advantage. One can budget one’s expenses accordingly.

The deferred period is also another important aspect. In insurance parlance, the time between the submission of claims and receipt of payment is known as deferred period. People with strong finances can look for a lengthier deferred period because that may reduce the premium quite drastically. Indeed, income protection insurance is beneficial, but one can get the best advantage out of such policies only if it purchased after due deliberation.

Income Protection insurance – A Look At The Idea

The concept of insurance has been there since the time civilization began to take its root, but income protection insurance is rather a modern notion.  The policy is solely meant for the earning members of the society. It is true that most policies, which are sold in the market, are life insurance policies, but in this modern age one needs something more than that and income protection scheme is  Preexisting Medical Conditions one of them.

What is Income Protection Insurance –

The words income protection tells a lot regarding the policy. It offers the policyholder protection, just in case there has been a loss of income due to sickness or accident related issues.  However, here is a word of caution for the policyholder. This is not an alternative to unemployment. The policy is certainly not a cover for lost jobs due to dismissal or criminal actions.

http://www.youtube.com/watch?v=PRnnlIAwF18

From Where To Buy Income Protection Cover –

Now the next focus is from where to buy income protection cover. There are plenty of insurance companies selling the policy and with most of them having online presence, locating someone should hardly be a worry.  The quotes or to be precise lower premiums are certainly a criterion. Nevertheless, the record of a particular firm in regards to claims payments should certainly receive focus. After all, the whole issue of buying protection is to receive benefits just in case there is a financial crisis. The amount of benefit too should get proper attention.

Why The Payout Is Limited To 70% Of The Last Income Drawn –

In general, the idea is to encourage the patient to get back to work. However, if the monetary payment exceeds the client’s income, then few will want to go back to work. Hence, on most instances, insurance companies try to curb the payout limit to 70% of the income. One can always do a comparative study of the offers  and then choose accordingly. To get a better deal, one can even consult insurance brokers. They are not attached to any insurance company. Hence, they will certainly offer the best.

What Is Deferred Period –

The deferred period is another area to focus on.  It is the period in between a claim and commencement of benefits. The longer is the period; the lower is the premium to be paid. However long deferred period may create trouble for those with limited saving and hence one should ponder over such points before picking up a income protection insurance.

Income Protection Payouts – A Boon To The Working Class

Income Protection Payouts – A Boon To The Working Class

Why It’s Needed & How Much It Pays Out

 According to a research study conducted by Unum and Personnel Today only an estimated 12% of employees gain staff support from their employers and for a year if they’re sick and in need of rest. This rather low chance of state benefits has seen to an increase in Income Protection Policies and working men and women taking it up. A public study was also conducted where only 9% of people said they have IP. Set against the 41% who have life insurance and the 16% who have Private Medical Insurance (PMI) that’s a pretty low comparative estimate.

These and similar studies and polls have shown the importance of Income Protection Policies to the adult worker and how it’s gradually picking up pace. The average worker can meet with injury and/or illness at odd times, making it important for them to stay secure in the present economical market. One of the most competent means of accomplishing that seems to be Income Protection. It pays out small dividends when the worker is off sick and fulfills certain other policy criteria to make them eligible for such payouts.

IP Payouts measure out a percentage of a person’s income, with 50-70% being the norm. The tax free nature of these payments at a down point in a person’s life has made IP policies quite attractive. The payouts take place once the pre-agreed time period has been crossed. This period ranges from 1-12 months since the claim being made. Common fact is the longer the ‘deferral’ period the lower the cost of premiums.

Statistics have it that IP Providers pay a high amount of claims made to them. In 2012, insurance giant Aviva published having paid 93.5% as IP claims. LV= paid 88.4%. British Friendly and Friends Mutual paid out 97% and 98% respectively.

[Source of all statistics cited: http://www.which.co.uk/money/insurance/reviews-ns/income-protection/what-is-income-protection/]

Income Protection Insurance – Illness & Injury Coverage

What Sorts Of Illnesses/Injuries Does It Cover

It’s an important thing to protect your income. In a market that has faced recession and is still climbing out of that pit workers everywhere, especially those open to getting themselves IP cover, have opted for Income Protection Insurance because they feel they can still hold on to their jobs as valuable employees even in periods when they succumb to sickness or injury from situations at work. The IP cover, based on certain eligibility criteria, will pay out sums of cash in the time the worker is inconvenienced.

The IP insurer makes certain the benefits/payouts do not exceed the worker’s income value lest the policy holder decides to lean a bit too heavily on the moral hazard side of the policy. Once the worker provides all the right certification and evidence required by the policy providers they then start receiving payouts in regular intervals or as per their policy contract. These amounts help keep them going until they are healthy enough to return to work, or have entered retirement or have passed away for a legit reason other than self-harm, alcohol and drug abuse and other such acts not covered by the policy.

General illnesses and injuries are covered under IP policies. Stress related ones, on the other hand, will need a few more certifications and confirmations from professional medical staff to be accepted. After all, most stress related illnesses are psychological in nature, making it near impossible to get physical evidence to prove their existence, which is something a handful of IP providers ask for. There are other Income Protection Insurers who do not do that, accepting a preliminary screening of the potential policy holder and calling it a day, with some extra steps required later on. Any major injury or illness or those brought on by self-harm and other similar factors mentioned earlier aren’t covered by IP policies.

Illnesses According To Income Protection Insurance

Kinds Of illnesses Covered by IP

Stress and back pain may be considered minor illnesses and not worth an insurer’s cover. However, stress and back aches have been known to get so severe people are ordered by their doctors to stay at home and rest. In these cases where doctor approval is readily available and evidence shown to the same, Income Protection Insurance takes these and other so called minor illnesses into consideration and pays out the required amounts according to the policy holder’s cover plan.

Some IP insurers require doctor certified illness slips while others prefer seeing actual physical evidence of the underlying causes of a person’s illness. Established Examples…

PG Mutual’s policy terms, for example, state that it won’t cover any mental or nervous disorders ‘without demonstrable organic disease’. Similarly, British Insurance may only pay out for back pain where there is ‘radiological medical evidence of abnormality.’ Insurer i:protect will pay out for three months following a doctor’s examination, but then requires scanned evidence of abnormal findings.

It’s sound advice to ask your Income Protection insurer if their policy helps cover back, neck and stress related problems. It’s also a practical idea to ask on what basis they craft their cover for such illnesses. For instance, Barclays insists on a psychiatric consultant’s report for stress and an orthopedic consultant’s report for backache. However, in conditions that border on or are fully in the psychological side of a person’s problem it can prove to be unreasonable to acquire physical evidence to back it up.

Higher level illnesses that can be classified as full fledged diseases don’t all take on IP cover. Some of them do while a majority of them will require more high-end insurance policies to cover it. In the case of cancer or Alzheimer’s it may not be easy to get IP cover.

Diverse Income Protection Products in The Market

Types of IP Products Insurers Provide

As with all insurance policies there are different products under each established category. There are 5 different products offered under Income Protection Insurance.

Increasing IPI: When inflation occurs, fixed-benefit policies see a reduction in value of the benefits paid. This means policies whose benefits increase are comparatively more suitable. These benefits can be made to increase at an indexed rate (like the Retail Prices Index). They can also increase by a fixed percentage or even a percentage opted for by the policy holder every few years. Premiums too increase with such polices.

Renewable IPI: With this cover, the policy holder gets the right to renew the policy at a set period. The time frame is usually five years and there could also be a potential increase in cover. This process depends on the prevailing premiums allocated to the person based on their age and occupation. While these premiums are cheaper at first (compared to a fixed IPI policy) they increase at each renewal (in accordance with the policy holder’s age increase).

Unit-Linked IPI: In general, no other IPI policy has an investment element. This means they also have no surrender value. However, a unit-linked IPI policy has an investment element rather close to what a unit-linked life insurance policy has going for it. With slightly more expensive premiums compared to standard policies (because of the investment element) this policy sees more expensive premiums if or when the premiums invested are poor.

Reviewable IPI: This policy has the same term as a fixed IPI policy. The premiums are reviewed every few years by the life office and they see an increase each time. The review is based on general rates and never on the policy holder’s claims let alone their health status. Initial premiums in this policy are cheaper than those in a standard one.

Group IPI: This policy is taken by employers for their employees. There can be a maximum payout period in such a policy which ceases to be valid once the employer has called a certain employee’s contract to a close.

Advantages & Disadvantages of Income Protection insurance

What’s Good & What’s Not Concerning IP Cover

There are singular benefits Income Protection Insurance offers in relation to accident insurance, personal accident and sickness insurance (PAS) and general sickness and unemployment insurance.

Benefit 1: The payouts are made as soon as the policy holder is found to be incapacitated. The payout become payable once the deferred period has passed. Payouts continue until death, retirement, end of contract term or conclusion of sickness (recovery).

Benefit 2: As long as the policyholder pays their premiums the insurer can’t deny renewing the policy nor can they cancel it.

Benefit 3: The cover/policy/premium benefits are paid out on a regular basis. This can be either weekly or monthly, depending on the cover chosen, and is free of tax.

Benefit 4: Using an option called ‘waiver of premium’ it’s possible for the Income Protection premiums not to be paid, based on certain conditions, while the benefits continue to be provided as long as the cover goes under the policy contract.

On the opposite side of the scale…

Disadvantage 1:  As is common knowledge with most insurance policies, even IP will provide no benefits for injuries or illnesses caused by criminal acts, self harm, alcohol and/or drug abuse etc.

Disadvantage 2: If the adult working policy holder becomes redundant for reasons other than illness or injury the policy will not provide payouts.

Disadvantage 3: Once occupations change for the policy holder so does the IP policy itself. A new one has to be made to cover the new risk based on the new occupation.

Disadvantage 4: Some IP policy holders will see much longer deferred periods which touch four weeks, sometimes more than fifty weeks. The premiums get lower as the deferred period gets longer.

Disadvantage 5: There is such a thing as moral hazard where the inconvenienced policy holder may not return to work if the benefits from the policy exceed that of his income. Therefore the maximum regular payment (payout) is restricted accordingly.