Income earning capacity of every individual never remains the same throughout the entire duration of their life. Accidents and illness often results in physical incapacity hampering their ability to earn. Though not desirable, but one needs to be well-prepared for the rainy days as well. Availing Income Protection Insurance is a good move towards enjoying a hassle free and confident existence even if you are physically incapacitated. However, prior to identifying the cheapest Income protection Insurance, we need to be sure that we understand the nuances of Income protection Insurance and the benefits it offers.
Understanding Income Protection Insurance (IPI)
Income Protection Insurance (IPI) formerly known as Permanent Health Insurance (PHI) has been in force since a very long time. In very lay man’s terms, Income Protection Insurance signifies the insurance coverage you avail in order to seek protection of your income even after you are rendered incapable of earning it owing to illness or accidents. Though catering to a universal need, the IPI is available primarily in Australia, Ireland, New Zealand, South Africa, and the United Kingdom.
Benefits of IPI
The IPI benefits are payable over a period agreed upon by the company providing the insurance. This could be a death, retirement or on the policyholder’s return to work. All benefits are tax free and are paid on a weekly or monthly basis.
IPI policies are sometimes eligible for a waiver of premiums. Under this scheme, the policyholder need not pay the premium amount at the time he or she is receiving the benefits. In addition to this, it is interesting to note that the policy cover remains the same.
No matter what the pre-defined period, the IPI covers around 50% – 70% of your income. They are however based on a percentage of your earnings. The payout occurs after the completion of the pre-agreed period, which is usually 12 months after the claim is registered.
IPI Restriction Clauses
Despite its all-inclusive nature, IPI does have several restrictions.
- IPI benefits can be availed only if unemployment occurs due to physical handicaps resulting out of sickness or accidents. IPI payouts do not occur if unemployment is caused due to any other reason.
- IPI is simply an income protection plan and does not include any death benefits or health coverage. Therefore, it is always advisable to supplement IPI with a life and health coverage plan.
- As the IPI payouts are tax free, the tax relief on the policy holder’s other policies are considerably reduced.
IPI Pricing and cheap Policies
Owing to the nature of the coverage it offers, Income Protection Insurance plans are usually quite expensive. There are ways however to reduce the cost and opt for the cheapest Income protection Insurance.
- Opt for a longer deferred period
Deferred period refers to the time between the registering of the claim to the actual payout of benefits. The longer this period, the lower will be the premium amount.
- Opt for Suited or any occupation incapacity type
Incapacity type also helps to reduce the cost of your policy. The Suited Occupation incapacity type refers to the policyholders who are unable to find work according to their qualification and training while the Any Occupation incapacity type refers to the policyholders who are unable to find any work at all. Both these categories of Incapacities ensure that policy holders pay lower premiums, thereby reducing the overall cost of the policy. Know more about Cheapest Income Protection Insurance.