Income Protection (IPI) product guide

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Income Protection, or sometimes known as IPI (income protection insurance) is designed to pay out when the insured person is unable to work through illness or accident. Following a deferred period the plan will provide a regular income, weekly or monthly, to replace the insured persons income.
Employed people may benefit from some protection through their employer, will it be sufficient; will it pay for long enough?

Income Protection can be set up to start when your benefits from work finish or reduce. For self-employed individuals Income Protection is a key part of their financial planning.

What income would you have if you were unable to work through illness or accident? How much cover do I need?

Income protection cover is usually limited to approx 60% of the insured persons current income. As the proceeds are exempt from tax, the maximum benefit could be very close to current earnings.
Points to consider;

What income would you need?
What income will you receive from existing benefits?
What state benefits could you receive?

Term of the Policy

 The term of the plan can run all the way through to your planned retirement age.

What are the Deferred Periods?

 The deferred periods are usually 4, 8, 13, 26 or 52 weeks. Obviously the longer the deferred period the cheaper the premiums are likely to be and can also be used to coincide with any benefits you may receive from work.
e.g. if your employer were to pay you 3 months full pay followed by 3 months half pay you could start your income protection benefits at half the benefits after 3 months, increasing to full benefits after 6 months.

Other Options

 There are other options that can be included in your Income Protection Plan such as an increasing option. This option will continue to increase the benefit level you have chosen to try and ensure it retains a ‘real’ value in line with inflation.