You might be afraid to become unemployed, or you may want Income Protection Insurance. If so, you should take note of these five things that they won’t tell you (or may ignore) when you buy an income insurance policy.
1. Exclusion Period
Nearly all policies include a clause that excludes unemployment claims for 120 days or for four months after the date of inception when the policy was issued.
This is to stop people from filing fraudulent claims about being laid off.
The exclusion period is the time you must be unemployed or disabled to qualify for claims payments.
Policy documentation will always detail the qualification period options. They can vary from one policy to another. You can often save hundreds of pounds by agreeing for a longer period in which you are not eligible to claim.
2. Monthly premiums
Income Protection policies provide monthly coverage with premiums that are usually paid in advance via direct debit.
They only cover you for a month at a time, so it’s easy to shop around and find better coverage for a lower premium.
You should immediately purchase income insurance if you think your job may be at risk from the fallout of the credit crunch or the bank collapse.
Keep in mind the exclusion period. If you consider that it costs you PS30 per monthly for PS1000 of income benefit (which is actually quite expensive compared with independent suppliers), a PS120 investment would guarantee you an income benefit every month of PS1000 starting at Christmas next year.
3. Change Policy
You should look into independent suppliers if you have ever purchased Income Protection from a bank, building society or other financial institution. Your premiums might be half of what you currently pay and your coverage restrictions may be more favorable to you.
If you have income protection insurance, your premiums are paid monthly. You may have to pay two premiums during the exclusion period, which can prove costly.
Many independent income protection providers will offer a premium waiver during this period to help you win your business.
4. Exceeding Period.
The excess period should not be confused with exclusion. It is the time between the date you file your claim and the time when the claim is eligible for payment.
It will vary depending on the income protection policy. Longer excess periods usually mean lower premiums.
Although this may not be the best thing for you, many independent income protection insurers now offer policies that have ‘back to day-one’ coverage.
What is “Back-to-day-one coverage”? This means that benefits are paid back from the first day you claim them.
If you have taken out insurance and made a claim on May 1, you would need to wait until May 31st before you could receive any benefits. However, the benefit would cover the entire time you were unemployed or disabled beginning May 1.
Effectively, you receive benefit as soon you become eligible for a claim. There is no excess period in which you cannot claim benefits.
5. Take a look around.
Income Protection Insurance is one type insurance where it pays to shop around.
It can be confusing to choose from so many options and have different premium rates and benefits. The Credit Commission in the UK has recently reported that major lenders were accused of mis-selling PPI and anti-competitive practices. One area where they are pushing legislation in January is to ban loan protection insurance from being sold with a loan, or within 14 days after selling a credit service. This would allow the customer to surf the internet for other IPPI products.
Today’s Internet sites are often independent product suppliers and make it quick and simple to purchase this insurance.
