Income Protection Insurance - 5 Things They Don't Tell You About When You Buy


If you are afraid of becoming unemployed or are thinking about purchasing Income Protection Insurance in the UK, then take notice of the five things they don't (or may neglect to) tell you about when selling you an income insurance policy.

1. Exclusion Period.

Nearly all policies have a wording which excludes claims for unemployment for 120 days or four months from the inception date when you took out the policy.

This period is to prevent fraudulent claims from people who knew they were going to be made unemployed.

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The exclusion period means the period of time that you will need to be unemployed or disabled before you qualify for claim payments.

The qualification period options vary by policy are always detailed on the policy documentation. quite often you can save many pounds by agreeing to a longer period during which you cannot claim.

2. Monthly Premiums.

Income Protection policies are monthly cover with the premiums usually paid monthly in advance by direct debit.

Because they only cover you on a month by month basis as long as you pay the premium, it is now very easy to shop around and get better cover at a much fairer premium.

If you feel that you job is likely to be at risk due to the fallout from the credit crunch and the banking collapse, you should act immediately and purchase some income insurance

Remembering the exclusion period, and say it costs you £30 per month per £1000 worth of monthly income benefit (which is incidentally quite expensive compared to the independent suppliers) a £120 outlay would secure you income benefit each month of £1000 from the New Year this year to Christmas next year, by when you should hopefully be back on your feet.

3. Changing Policy.

If you have previously purchased Income Protection from a bank or building society you should consider changing to an independent supplier, whose premiums may only be half what you are currently paying and whose cover restrictions may be more favourable to your individual circumstances.

Because you pay you premiums monthly if you already have income protection insurance in place, you may need to cover two premiums for the exclusion period if you purchase a new policy, which could prove expensive during the exclusion period.

However many of the independent income protection providers may have in place a premium waiver for this period in order to win your new business.

4. Excess Period.

Not to be confused with the exclusion period, the excess period is a period of time from the day you make your claim until the claim is eligible to be paid out.

It varies considerably by income protection policy and longer excess periods generally mean cheaper premiums.

This may not always be in your best interests, so many of the independent income protection insurance suppliers now offer policies which have 'back-to-day-one cover'.

But what exactly is 'back-to-day-one cover'? It means that claims are paid back to the very first day of your claim for benefit.

For example, if you take out cover and then made a claim on the 1st of May you would wait until the 31st of May before receiving any benefit but the payment would be for the entire period you are unemployed or disabled from the 1st of May.

So effectively you get benefit as soon as you are eligible for a claim and there is no 'excess period' in which you can't claim benefit.

5. Shop around.

Income Protection Insurance is one type of insurance where it really does pay to follow the principle or maxim 'shop around'.

With so many offerings and variances in benefits and premium rates, on the market it can get confusing. A recent report by the Credit Commission in the UK accused the major lenders of anti-competitive practices and mis-selling of PPI and one area for example, where they are pushing for legislation in January, is by disallowing loan protection insurance to be sold alongside the loan or within 14 days of having sold a credit service to a customer, allowing that customer to for example surf the net for alternative IPPI products.

However today the better Internet sites, which are generally independent product suppliers, now make the process quick and easy, and should not deter you from purchasing this modern insurance essential in this most turbulent of economic times.


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