It is important to understand what Income Protection or PHI is? Income Protection is type of insurance, which provides you an income in case of illness, injury or disability. Practically covering you if you are unable to work. You would need to provide your GP sick note to prove your inability to work.
Income protection insurance will pay out a monthly benefit, which is a percentage of the your actual earned income, after a waiting period known as the deferred period. The deferred period is the initial period of time in which no benefit is paid and it could be from 0 days to 12 months. The deferred period is normally based on your requirements as in some cases if you are only covered for sick pay at work for 6 months then this would your deferred period on the income protection policy. General rule of the thumb is that higher the deferred period equate to lower premiums.
The monthly benefit provided by income protection insurance is usually paid until you are able to go back to work, reaches the end of the policy term, reaches the policy’s retirement age or Benefit period duration selected whichever comes first. You can cover yourself for 50-70% of actual earned income.
Income protection is important for those individuals who depend on their income to pay their essential expenses or living expenses. For example, self employed or tradespeople do not work for anyone but themselves and their work is dependent on their good health to work.
Income protection insurance can have some exclusion on certain occupations and other factors, which are mentioned in the policy terms. People with some pre existing conditions may be able to get this insurance with rated premiums and some exclusion applied.
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