Answered by Tom Conner
What Income Protection covers
This is a very good question and comes up a fair amount. Essentially, permanent health insurance (PHI) is the name that used to be used for what is now called income protection (IP).
What it covers
This plan pays out a monthly benefit if you are unable to work due to illness or injury. It is a long-term plan providing cover all the way up until the age you expect to retire, meaning that these plans can payout for many years if you are not well enough to return to work.
Often confused with payment protection
It is unfortunate that payment protection plans set up to cover general income (rather than a loan or mortgage) are also termed as income protection, even though they are very different to permanent health insurance policies.
Payment protection insurance (PPI) comes with far less favourable terms and conditions relative to ‘traditional income protection’ and can only payout for up to 12 or 24 months, making it a far inferior policy.
Does it cover redundancy?
Traditional income protection plans only cover the earnings risk due to accident and sickness. However, some long-term IP plans now have the option to add up to 12 months of unemployment cover, much like payment protection policies.
Not private health insurance
It is important to note that permanent health insurance is very different to private medical insurance (PMI), which is a type of policy designed to meet the cost of private hospital bills for healthcare treatment rather than to cover lost income.
See our ‘Guide to Permanent Health Cover’ for more information.
Frequently Asked Income Protection Insurance Questions
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