Income Protection Insurance or IPP

By Simon Lance Burgess

Income protection insurance is often confused with income payment protection insurance (IPP) and other payment protection products. Income protection insurance is often confused with income payment protection insurance (IPP) and other payment protection products. It is more of a long-term protection. IPP is part of an umbrella of under appreciated short-term unemployment and accident and sickness insurances known as payment protection insurance (PPI). It generally offers 12 to 24 months of monthly payments, which typically cover up to 50 per cent of a covered person's normal monthly income, or 1000 pounds, whichever is lower.

Covered events under the income protection insurance plans include involuntary redundancy, accident, or illness. The involuntary redundancy is a big benefit that separates payment protection insurance products, including income payment cover, from the income protection insurance products. In fact, PPI covers are one of the few options Brits have to protect their monthly incomes in the event of unemployment. It does not protect voluntary redundancy, but neither income protection insurance, nor State support, can offer much or any support for unemployment situations that people face.

Big improvements have developed in recent years within the PPI industry. These improvements should continue as regulations to protection consumers against unfair selling practices are on the horizon. Based on complaints from consumer groups to the Office of Fair Trading (OFT), the Competition Commission is investigating the industry and is set to announce its plan of action in February of 2009. Many people expect stronger regulations to protect consumers.

The negative behaviour of large institutions like banks and lenders has actually helped create consumer awareness of payment protection covers and improved interest in more reputable brokers. Banks and lenders have notoriously packaged their insurances with loan products in order to pressure customers to buy them. Some have even billed the premiums without directly communicating so to the customer. They have instead fit the details into the fine print of loan disclosures.

Some sellers have even sold the protection to part time employees and retirees who are ineligible to receive benefits based on the full time requirements of the cover. Brokers have risen to the top of the industry with regard to respect for fair business practices and support of customer interests. Brokers usually offer plans with premium rates at least half that of rates offered by high street banks and lenders. Between the lowered premiums and the improved benefits, independent providers are definitely the best value in the payment protection insurance industry. Specialist brokers have even developed unique benefits to improve opportunities for consumers of all ages to get fair premiums, as well as benefits customized to the needs of the insured.

Unlike long-term income protection insurance, income payment plans and other payment protection insurance products are to help injured or ill employees see their way through short-term glitches. For many, the stress of prolonged illness or injury is enough to bear, without adding the stress of insurance hassles. Brokers understand these stresses and want to do whatever they can to help match prospects with plans that have the best rates for the desired covers. Payments for covered events generally begin from 30 to 90 days after the coverage begins.

Simon Burgess is Managing Director of the award-winning British Insurance, a specialist provider of income protection insurance.