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Income Protection Can Be Invaluable, But The Sector Is Still Confusing

Nov 10, 2007
Income protection is taken out to ensure that if you were to come out of work due to suffering an accident, through sickness or if you were to become unemployed by such as redundancy then you would still have an income with which to pay your essential outgoings.

Providing income protection is suitable for your circumstances it would begin to provide you with a tax free income to replace up to a certain amount of your lost income each month once you had been out of work for a certain length of time, which can be anything between 31 and 90 days of being out of work. Once the cover had started to payout then it would continue for between 12 and 24 months depending on the provider and it would make sure that you could pay your essential outgoings and so not make a huge difference to your lifestyle.

However just as will all the family of payment protection there are reasons which could stop you from claiming on a policy which means income protection might not be suitable for your circumstances. While exclusions can differ slightly between policies there are some that are common to all policies and these include being of retirement age, if you are self-employed, only in part time work or if you suffer from an ongoing illness at the time of taking out the policy. It is essential that you check the small print of a policy because this is where the exclusions can be found and they can make the difference between you being able to claim and being stuck with a policy that's useless.

The exclusions are just one of the many reasons why income protection and the rest of the family of protection policies are confusing and it is hoped that soon policies will be easier to understand. In 2005 the Office of Fair Trading received a super complaint from the Citizens Advice which led to an investigation by the Financial Services Authority and the subsequent handing out fines for mis-selling of payment protection products. The main reason for the mis-selling was a lack of information being given to the consumer and from the investigation it was stated that firms were to make huge improvements to their selling techniques. While changes have been made the latest news is that there is still very little progress been made in three out of the five key areas that needed to be improved, which means that payment protection of which income protection is one, is still confusing.

This might change in March 2008 with the introduction of comparison tables by the Financial Services Authority. The tables will ask a series of questions so that the consumer can determine which policy is suited to their needs along with laying out the exclusions and key facts and telling the consumer exactly how much the cover will cost. For now if you want income protection the safest and cheapest way to purchase it is by going to an independent specialist provider for your cover, a specialist will not only save you money on the premiums each month but also give you the advice you need to ensure that a policy is suitable for your circumstances.
About the Author
Simon Burgess is Managing Director of the award-winning British Insurance, a specialist provider of income protection insurance, mortgage payment protection insurance and loan protection insurance.
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