Types of Policy

Accident, Sickness and Unemployment Insurance is designed to reduce the impact of loss of earnings if you are made redundant or become too ill to work. There are several different policies you can choose, and it is important to know the difference between them.

1. Loan Protection

Loan protection insurance can help you protect your loan payments if you become unemployed, suffer an accident or ill-health, or you die. There are two major categories of product available.

Payment Protection Insurance (PPI)

Policies are available to protect most forms of personal credit, including personal loans and credit card repayments. Cover is often bought at the time the finance arrangement is made, but may be available at a later date or taken out as a stand-alone policy.

If you are unable to work due to unemployment or incapacity, you will normally have to wait a certain amount of time before you can start to claim - usually about a month. Once a claim has been accepted, benefits (up to the full amount of your loan repayment) will usually be paid for 12 months, but some companies may pay for as long as 24 months.

Mortgage Payment Protection (MPP)

Also known as Mortgage Protection Insurance (MPI), this policy can help you protect your mortgage payments and other household costs if you become unemployed or suffer an accident or ill-health. Cover is designed to protect your monthly mortgage payment, monthly life premiums and the monthly cost of your buildings and contents insurance, up to a pre-defined limit.

As with PPI, you will usually have to wait a month after you have become unemployed or ill before you receive any benefits. Payments will normally be made for 12 months, but some policies may pay for up to two years.

2. Income Protection

These plans are designed to give you a regular tax-free benefit if you are injured or too ill to work, resulting in a loss of earnings. There are two main types of product available.

Income Protection Policy

This plan will provide you with an income in the event of unemployment, accident and sickness for a specified period of time. You will be able to insure your earnings up to a specified amount per month, or a percentage of your earnings, whichever is the lower. This percentage can range between 50-75% of your salary. Benefits will be paid for 12-24 months, at which time cover will cease.

Permanent Health Insurance (PHI)

This is an insurance policy that will pay you a percentage of your income until retirement, should you become unable to work due to ill health - usually regardless of the causes. You can normally insure between 50-75% of your gross income, and you can opt to have any benefits inflation protected.