What is Income Protection Insurance?

There are two variations of Income Protection Insurance: - Short Term Income Protection and PHI or Permanent Health Insurance.

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Income Protection Insurance will pay you a tax-free monthly income if you are off work due to sickness or accident. Most Short-term Income Protection contracts can also offer you the option of covering yourself for unemployment.

Unemployment cover is not possible with Permanent Health Insurance.

Short Term Income Protection Insurance will generally provide you with an income only for a limited period of time, usually 12 months, Permanent Health Insurance, however, will continue paying you until the expiry of your policy - no matter how long that may be (all PHI contracts stop at retirement age).

These policies require you to have been unable to work for a set number of days before you can claim. This is referred to as the “qualifying period” and is usually 28 days or a month for Short Term Income Protection Insurance policies. With most Short Term Income Protection Insurance policies the income will start after the qualifying period but some more generous policies will even backdate payments to when you started to be off work.

Once you have begun a claim under Short Term Income Protection Insurance contract, the insurance company will pay you until you are either back at work or for a limited number of months (usually 12 months), whichever happens soonest.

You may also find you can insure yourself for just unemployment or alternatively sickness and accident combined. As long as it is affordable, we advise you to insure yourself for all three possibilities.

With PHI the qualifying period can be from 1 month to a year. The Insurance Company will offer you several alternative lengths of qualifying period and you need to decide which suits you best. E.g, If your employer continues to pay your salary for 3 months of sickness absence, you do not need your Permanent Health Insurance policy to pay out during the first three months. Longer qualifying periods = Cheaper Premium.