Reasons for IPI
The primary reason for income protection insurance, or IPI, is to cover a percentage of your income if you should be unable to work because of an accident or illness. Whilst IPI benefits do not replace salary, your weekly or monthly payouts may replace between 50 and 70 percent of your earnings if you cannot work because you have been injured or you've fallen seriously ill. Standard IPI policies cover only injury and illness; however, short term redundancy protection is available through certain types of income protection cover.
Protecting Your Outgoings
For many wage earners, a period of unemployment could quickly result in a financial crisis. Income protection insurance benefits can help you cover your basic costs of living if you should suffer a loss of income for medical reasons. If you become unemployed, it is important to prioritise your expenses so that you are covering the essentials first. Your mortgage or rent, food, gas and electricity and transport must take priority over credit card or personal loan repayments.
With the payouts from IPI, you may avoid the severe financial consequences of unemployment, such as eviction from rental housing or the loss of a home due to missed mortgage repayments. Mortgage payment protection insurance, or MPPI, is available to cover the costs of a mortgage if you should become unemployed due to redundancy, accident or illness. MPPI payouts generally continue for up to 12 months after you become unemployed.
IPI benefits allow you and your loved ones to continue living in relative comfort if you should be unable to earn an income for a certain period of time. You may also be able to keep up repayments on personal loans or charge accounts. Even when you are healthy and have no medical concerns, income protection insurance can give you greater peace of mind about the security of your household finances. The tax free benefits from income protection insurance can supplement other sources of income if you are unable to work.
Supplementing State Benefits
One of the reasons that many professionals choose to buy IPI is that state benefits are generally not sufficient to cover all of a household's outgoings. If you are unable to work for 4 or more days in a row because of an injury or illness, you may collect Statutory Sick Pay through your employer. SSP benefits may continue for up to 28 weeks, after which you may apply for Employment Support and Allowance if you are still unable to work.
SSP benefits are calculated based on your earnings during the 8 weeks before you became ill or were injured. The standard SSP benefit is less than 90 pounds per week, and benefits are subject to tax. Many households cannot cope financially on SSP or ESA benefits. Even if you are able to cover rent, food and utilities, you may fall into arrears on an automobile loan or other financial commitments, resulting in late fees and higher interest rates. In addition, the stress of living on a restricted income may delay recovery from a severe illness or an injury.
There are many reasons for IPI, and this valuable product has helped many working professionals and families to avoid the consequences of a loss of income. After you become unemployed, IPI payouts will continue for the extent of the coverage period, unless you resume working, retire or pass away. With the financial support provided by IPI payouts, you can supplement state benefits, personal savings or investment accounts and other sources of household income until you are able to recover your health and return to your job.
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