Insurance protection plays a crucial role in ensuring that a homeowner can sleep peacefully at night and that workers are not worried about being sick for a while. Despite recent negative press about how insurance was sold to the public, these products are still very affordable and offer a wide range of coverages.
The two most popular types of insurance on the market are income protection and mortgage protection.
They appear to be quite different products, providing coverage for very different items. However, both are types of protection insurance, originally called ‘permanent’. It could be argued they offer the same coverage for the same risks with a different marketing angle.
Each policy provides a cash sum each month to help with out-goings if the policyholder is unable to work because of illness, injury or short-term unemployment.
Permanent health is also known as protection insurance, accident, sickness or unemployment insurance.
All insurance policies that provide protection are intended to provide a monthly income for people who can’t work because of one of these perils.
Insurance policies pay benefits to you if your job is lost, or you become sick. For the agreed term, benefits are paid on a monthly basis. Each month, the policyholder must pay a small premium by direct debit.
A short history of protection products
Around 1900, permanent health insurance was introduced in the UK. It was sold during the days of insurance salesmen knocking on doors to sell their products. This is an example of door-to-door sales.
Workers and their families could get limited protection if the primary breadwinner was hurt or suffered an injury at work. Permanent health insurance offered some short-term protection. This was before the advent of safety and health ay work, unemployment benefits, sickness pay and accident lawyers.
In the 1980’s, with increasing home ownership and a consumer zeitgeist in the 80’s, the concept of different types protection insurance was first introduced. The market responded to the need for flexible and desirable coverages by promoting insurance protection.
Mortgage protection was initially sold to a large number of people by the same company that provided the loan or mortgage. It didn’t seem to matter that the product was missold to self-employed people or people were coerced into purchasing it in fear of losing their mortgage.
People love to protect their property, so they religiously pay their monthly payment for protection.
Boom busts and high unemployment were also common in the 1980’s. This was due to Western economies restructuring and heavy industry falling into decline.
Insurance companies saw a gap in market and created income protection insurance for the unemployed. Even though most workers did not own any property, they had to pay their monthly expenses.
While mortgage protection was available only to homeowners, income protection insurance could be provided to all workers, tripling market potential. It was the fear of losing your job that made the product a huge success.
Despite the fact that sales have dropped in recent years due to the mis-selling scandal of early twenty-first-century, the products still offer good value for those who qualify.
Income Protection
Both products are easily available online and readily available today.
In many cases, income and mortgage protection cover the same events. Policyholders should not buy both to avoid double indemnity.
For the purpose of issuing a policy, the same personal data will be collected. However, a proposal to protect your mortgage against foreclosures will require you to provide current details about your mortgage company.
Both protection insurance types are treated in the same way from an underwriting and claims perspective. However, there are subtle differences among the products and the respective policy words.
The terms and conditions of coverage in the event that a claim is made are generally the same for both types. People who don’t meet the strict criteria for both types of policies will be excluded.
The major difference between these two protection products is the fact that mortgage protection benefits are only designed to cover monthly mortgage payments.
The amount of benefits under a mortgage protection agreement is often significantly greater than that available under an income protection policy to help cover the high mortgage costs.
Income protection is meant to pay monthly bills and outgoings. It is typically limited to fifty percent of the monthly income of the proposer.
These days, mortgage protection policies often allow policyholders to increase the benefit to higher limits to cover additional monthly expenses like council tax and public service bills. This is basically to protect income.
Many protection insurance options are now available online. It is easy to compare prices, covers and exclusion clauses and limit of indemnity for any type of insurance.
