Although payment protection insurance and income protection are designed to cover people against unemployment, sickness and injury, there are some important differences between these policy types. For people who work in the insurance industry, the various merits of PPI and IP may seem as clear as crystal. However, for the average consumer the line of separation is likely to appear rather blurry.
The notable similarities begin with the fact that PPI and IP may cover the policyholder for anywhere between 12 and 18 months depending upon the choice of payment period. This means that each type of policy is considered suitable protection against reasonably long term illness and injury. However, it is worth pointing out that the level of a payment protection insurance claim is entirely dependent upon mortgage, loan or rental obligations, whereas the size of an IP payout is based on the earnings made by the claimant.
As with the majority of insurance types, the demanded premiums will vary depending upon the individual circumstances of the insurance customer. Those who are at high risk of injury or illness will invariably have to pay more. This is true of both payment protection insurance and income protection. However, when it comes to an enforced period of redundancy it is only the PPI policy that will pay out.
How much faith you can place in receiving your PPI payout is entirely debatable. With the numerous reports of misselling and readily available information regarding policy exclusions people are rightfully questioning the reliability of such insurance. Although there have been similar reports concerning income protection, they haven't been nearly as widespread. The opportunity to obtain reasonably priced cover of this variety is relatively great, especially if the policy is purchased some time before the cover period commences.
Experts will tell you that one of the biggest advantages of income protection is that it can be relied upon to pay out for the duration of the term, which may be until you're fit enough to return to work or retire. In the case of payment protection insurance, the money will stop being made to the claimant after a defined period, whether or not they have recovered from an illness or started working again. This is one of the main reasons why people often look for alternative forms of cover.
Whether you believe that one of these policy types is more suitable than the other it is absolutely imperative that you talk your choices through with an independent advisor. They may explain options that you hadn't previously thought of, such as the purchase of both income protection and specialist unemployment cover. It might even be possible to secure a significant discount by investing in an insurance bundle.
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It is indeed important that you understand how income and payment protection insurances work before signing up any policy. However, if you're stuck making a tough decision, seek the help of an insurance broker. He/she may be able to advise you on which plan would best meet your needs.
ReplyDeleteRegards,
Chris from buyincomeprotection.co.za