Compare Income Protection Insurance

What is Payment Protection Insurance?

Is a term which describes any insurance which can provide an income to meet your ongoing commitments or specific debts like your mortgage or personal loans.

• Permanent Health Insurance (PHI) replaces a proportion of your income if you are unable to work due to accident or illness. You can use the monthly payments for any purpose. The maximum accident and illness cover is usually around 60% of your income because payments are made tax free. Payments are made until you return to work or until retirement age.

• Mortgage Payment Protection Insurance (MPPI) is designed to meet your monthly mortgage payments if can't work due to accident, sickness or unemployment due to redundancy.  Mortgage protection insurance usually includes accident, sickness and unemployment cover (ASU) where payments are usually made for a specified period such as one or two years.

• Payment Protection Insurance (PPI) also known as Credit Insurance, Credit Card Payment Protection Insurance or Loan Payment Protection Insurance is similar to a mortgage protection plan but is used for specific debts such as personal loans, car loans or credit card payments. Like MPPI, payment protection cover payments are usually made for a specified period.

Cheap income protection insurance protects against the unexpected because your outgoings don't stop just because your income does.

	Income protection rates from 92p* per day for £100 of monthly benefit.

* The rate quoted above is based on per £100 of income required. Figures correct as of January 2013.  Provided by BestValueCover.co.uk whose insurance intermediary activities are undertaken by Esmart Media Ltd. Esmart Media Ltd is an FSA Appointed Representative for insurance mediation activities.

Who is income protection suitable for?

Pretty much anyone who has got regular commitments which they need to meet. Most of these still apply whether or not you are in work.

• A PHI policy which is set up correctly should be able to meet most of your commitments.

• You should consider how you would meet your regular payments on your mortgage and personal loans if you were unable to work. If you wouldn't be able to meet these, payment protection cover or mortgage protection may be suitable for you.

What should you look out for?

These income protection policies work in different ways, so there will be different things to be aware of depending on the type of policy.

• PHI policies have a 'deferment period' which is a period of time between you not being able to work, and when the payments from the policy start. You can choose the length of this period, usually between 6 weeks and 6 months. The longer the deferment period, the cheaper the premiums will be. Make sure this period ties in with any length of time you get paid by your employer. If you're self employed you will probably need the minimum deferment period.

• PHI policies can be set up on an 'own occupation' or 'any occupation' basis. Own occupation will pay out as long as you cannot work in your current job. With an 'any' occupation policy, if the insurer thinks you're fit enough to return to work doing something else, they may reduce or stop your payments.

• PPI sales have had a lot of criticism in recent months because the policies have been sold to people who weren't eligible to claim on them or because of the perception of them being poor value.  The Financial Ombudsman Service PPI guide (PDF) looks at the issues that come up most frequently when consumers have disputes about payment protection insurance. 
  

How to independently reclaim mis-sold PPI

• In most cases credit card PPI will only meet the minimum monthly repayment so you won't get a charge for late payment. So if you're used to paying off the whole balance on your card protection insurance each month, you'll end up with an interest charge for the rest of the outstanding amount.

• PPI is optional and you should shop around if you intend to take this insurance out. The policy your lender offers you might not be the best value, or the best quality of cover.

• Most PPI policies related to personal loans which are bought from the lender are paid for by a lump sum premium which is added to your loan. So you pay interest on the premium and may not get a full refund of the premium if you repay early. If you have to get this type of policy, make sure it allows for a 'pro-rata' refund so you only pay for the cover you have. Better still, buy it separately so you don't have to pay interest on the premium.

• Don't buy the PPI the lender offers you. It can be a valuable insurance to have, so go to an independent broker who can get you a better product which is suitable for your needs.

What next?

Get income protection insurance quotes. 

Just tell us how much you need to cover your income every month, how long you want to be protected for i.e. 1 year, your age and a few contact details so we can give you a personalised quote. The quote is absolutely free and you are under no obligation.