What are the different types of Income Protection?
At it’s highest level, there are two types of Income protection policy: 1) Short-term Income Protection policies, which are otherwise known as Accident, Sickness and Unemployment (ASU) products, will generally only pay out for one or two years; 2) Long term Income Protection, these will usually provide a regular income if you are unable to work due to illness or disability until you are well enough to return to work, or until the end of the policy term.
Short Term Income Protection
There are many different Accident Sickness and Unemployment policies available, including Payment Protection Insurance (aka PPI) and Mortgage Payment Protection Insurance (aka MPPI). Payment Protection Insurance for example, usually meets the cost of a specific debt, preventing you from defaulting. Mortgage Payment Protection Insurance will cover the cost of mortgage payments for a specified time. Many Short Term Income Protection policies do not need to cover a specific debt; they can simply be used to fund your lifestyle in the event that you lose your income.
Long Term Income Protection
Long term Income Protection, however, will usually provide a regular income if you are unable to work due to illness or disability until you are well enough to return to work, or until the end of the policy term. Unlike most Short Term Income Protection policies it will generally not cover you if you are made unemployed or redundant. When choosing Long Term Income Protection cover, make sure you know exactly which kind of plan you are buying as there are commonly two types, ‘own occupation’ and ‘working tasks’.