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Income Protection Insurance (IPI), what was previously known as Permanent Health Insurance, is a policy designed to provide coverage against the policyholder's income. In other words, every active policyholder is entitled to some benefits if they cannot continue working as a result of a disability.
It is true that there are different types of disability insurances in the market today, but their scope of coverage tends to be limited. Most of them provide coverage only to salaried individuals who contribute to the funds. As for IPI, it is open to both the employed and the self-employed.
By the same token, there are systems set in place by governments to pay disabled citizens. However, these funds are only accessible to people with permanent disability, and not those with temporary disability which leads to loss of income. IPI can therefore be said to be a stable source of revenue when you are unable to continue working to generate money for your survival.
Just like your monthly earnings, you will not receive a lump-sum disbursement but a monthly payout of up to 75% of your monthly wages. IPI will cover any accidents, illnesses, or life traumas that leave you weak and dependent. Note that once the elimination period is over, the payout (read indemnity) will be coming in every month until you get back to work.
Should you be rendered permanently disabled, you will get your monthly compensation until you hit the age of retirement, normally 65. Further, indemnity is tax free; providing a great source of revenue to pay for such things as mortgage, school fees, put food on the table, and simply allow you to meet all your financial obligations as you were doing before you became disabled.
Be advised that the payouts are generally fixed as a set percentage of your monthly earnings. Note also that you can buy the Income Protection Insurance as a proviso for certain types of financial deals e. G. Car loans, mortgages, and credit cards. It means that should you be rendered disabled, you can willingly suspend all payments to your creditors without the risk of incurring a penalty.
There are two approaches to IPI; you can buy coverage to protect you when you are not able to make any form of revenue. You can also buy coverage to protect you when you are unable to work in your chosen profession as a result of a disability.
One more thing, IPI normally has an elimination period, a period where you should not claim any benefit. This works more or less like a deductible in that the longer the period of elimination, the more affordable your coverage will be.
Therefore, it would be wise to consider the duration of time you can live comfortably without an income. If you have a substantial amount in your savings, you can choose a longer elimination period of up to 6 months. On the flip side of the coin, if you are limited on cash and have urgent financial obligations to meet, you can choose a 14, 30, 60, or 90 day period of elimination.
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