Answered by Tom Conner
The difference between insurances to protect your income
Essentially, there are two main types of cover available, income protection (which used to be called permanent health insurance) and payment protection (which, confusingly, is sometimes referred to as short-term income protection).
What is income protection?
This is a long-term type of cover designed to protect your earnings until retirement against the risk of sickness or injury (sometimes referred to as disability or incapacity). Thus, if you were off work ill for 4 years the plan would cover this entire period, paying out a proportion of your earnings every month.
These plans do not usually cover redundancy but a limited number of insurers will allow you to add up to 12 months worth of cover.
What is payment protection?
This is a short-term type of cover designed to protect your income or expenditure for up to 12 months against the risk of accident, sickness and unemployment. It is usually possible to take out a plan just for accident and sickness or redundancy, rather than all three cover types together.
Although this type of cover can be used to protect general income, most plans are designed to cover expenditure, with a common plan being mortgage payment protection.
Accident and sickness cover only
If you are only looking for sickness and injury cover then income protection insurance is the superior product in terms of quality and conditions covered. For the majority of workers it is possible to gain ‘own occupation’ cover, which means the plan would payout for practically any medical condition that prevents you from working in your own job.
Payment protection is often weak when it comes to claims for back, neck, mental health and chronic medical conditions (which form a significant propitiation of income protection claims). Furthermore, having only 12 months worth of cover isn’t usually close to enough when it comes to serious illness or injury. Payment protection plans also commonly only cover you in a ‘suited occupation’ rather than your ‘own occupation’.
It might be of benefit to speak to one of our expert advisers who can help you find the most suitable insurance for your needs. We offer a fee free service, are totally independent and have access to the whole of market. Give us a call on 01273 646 484 or email us on email@example.com
Frequently Asked Income Protection Insurance Questions
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