Guide to Income Protection Insurance – part 1 of 5
With more than two million people aged between 20 and 64 years old having been off work for a period of more than six months, the issue of income protection insurance also known as 'payment protection insurance' (PPI) or 'Accident Sickness and Unemployment cover' (ASU cover)] has rarely been more relevant in the media.
Critics have labelled it a waste of money with borrowers often paying five times over the odds for policies taken out with a loan. However, if you fall ill, suffer an accident or are made unemployed, income protection can provide vital cover.
If bought independently, income protection can offer peace of mind at a decent price. At moneysupermarket.com we have an income protection comparison tool that will compare the best income protection insurance deals on the market. Before you use the tool however, make sure you're fully informed by reading the moneysupermarket.com income protection guide so you know if this controversial cover is right for you.
What is income protection insurance?
Income protection insurance is taken out against the payment of a debt - ie it promises to cover your repayments (whether it is a loan or credit card debt) in the event that you lose your income due to unemployment, illness or an accident.
As an example, if you are unable to work for 30 consecutive days or more (bear in mind some policies have a deferred period of six or twelve months) you should be entitled to make a claim. When you take out the policy you will able to choose the length of time you wish to be covered for (one year, two years and so on) but it goes without saying that the longer you wish to be covered for, the more expensive your premium will be. Generally, most policies are continuous. Payments continue until you decide you no longer require cover.
The vast majority of income protection policies will only cover 75% of your income - and in some cases 50%.
In part two we'll take a look at the benefits of income protection and why it causes controversy.
Income protection guide part 2 >>>
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