What is Income Protection Insurance?

There are two main variants of Income Protection Insurance; Short Term Income Protection and Permanent Health Insurance.
Income Protection Insurance pays you a tax-free income if you are off work due to sickness or accident. Short term Income Protection may also offer you the option of covering yourself for unemployment.

Unemployment cover is not available under Permanent Health Insurance.

Short Term Income Protection Insurance generally provides you with income for a limited period of time, typically 12 months, whereas Permanent Health Insurance will continue paying you without break until the expiry of your policy - no matter how long that may be.

All these policies require you to have been off work for a stated number of days before you can claim. This is known as the “qualifying period” and is typically 28 days or a month for Short Term Income Protection Insurance. With some Short Term Income Protection Insurance the income will start after the qualifying period but more generous policies will back-date payments to the date you started to be off work.

Under Short Term Income Protection Insurance, once you have started to claim the insurance company will continue to pay until you are either back at work or for a specified maximum number of months (typically 12 months), whichever event arrives soonest.

With Short term Income Protection you may find you are given the option of insuring yourself for just unemployment or alternatively sickness and accident combined. As long as they can afford it, most people insure themselves for all three eventualities.

With Permanent Health Insurance the qualifying period can be between 1 month and a year. The Insurance Company will offer you a number of alternative lengths of qualifying period and you have to decide which would be most suitable for you. For example, if your employer continues to pay your salary for up to 3 months of sickness absence, you would not want your Permanent Health Insurance to pay out during the first three months. You should be aware that the premiums for for longer qualifying periods are significantly cheaper.

Most good financial web sites will offer you Short Term Income Protection. Permanent Health Insurance is more difficult to find on the web but MoneyQuest can help.

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