Wednesday, September 5, 2012

Understanding the Need for Income Protection Insurance

All men and women are very much aware they they've to work pretty much till their last day of retirement (and perhaps even beyond that) in order to earn their bread and butter. Most of the people consider the capacity to pool the financial resources as the greatest monetary asset.
Income Protection Insurance is considered as insurance policy that ensures compensation throughout the lifetime in the unfortunate event that the policy holder gets incapacitated for life-time, and becomes unable to work because of accident or illness thereafter. IPI policies were formerly known as Permanent Health Insurance.
By registering with the income protection insurance, the person can secure almost 75 percent of his monthly wages, when he is not physically healthy to work for certain time period.
Men and women who are not certain about the terms and conditions of the insurance policy can take the financial advisory assistance. This is because those professionals are very much willing to help you in managing the monetary resources in right manner.

Benefits of Income Protection Insurance
Income protection insurance offers you several benefits when compared with the other insurance policies like accident, unemployment insurance, sickness and personal accidents.
Benefits related to income protection insurance are payable when the policy holder becomes incapacitated. The policy depends upon the terms of contract. Benefits should be paid on regular basis and are exempt from tax.
Insurance companies cannot refuse or cancel the policy provided to the policy holder, if he/she has paid the premium on-time throughout the tenure of the policy.
Benefit Limits - Usually, benefits are limited to certain extent or to some percentage of the normal earnings of the policy holder. The limit will be around seventy percent of gross earnings. It could be less than 70 % for high earners.
Pricing - IPI policies are expensive due to the guarantees that are offered by the policy. Premium decreases as deferred period increases. Options like 'any occupation' and 'suited occupation' or 'own occupation' will reduce the policy cost.
Premiums that are paid by employers for providing the coverage for their employees are tax-deductible. Benefit payments that are paid from policy, following the illness or accident of the policyholder are free of National Insurance contributions and income tax.
IPI policies are also called long-term insurance and they are regulated by FSA- Financial Services Authority under the rules of Insurance Conduct of Business Sourcebook.
This regulation requires insurance company to keep the contract records for 6 months.
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