Many individuals wonder how they would keep making their mortgage payments and keep up with their credit card and loan payments if they ever lost their income.
While this is a scary thought for many, there are insurance policies that could potentially help someone in this position.
Even though this may seem like a great idea, it is essential to consider these policies carefully. The Claybrooke team are on hand to help at any time, so please don’t hesitate to get in touch.
Available Insurance Policies
When it comes to financial support after losing a job, there are three types of insurance products available:
Payment Protection Insurance (PPI): Payment protection insurance, also called accident, sickness, and unemployment (ASU), can help cover credit card and personal loan payments after income loss. Payouts for this policy usually last a set amount of time, generally between 12 and 24 months, and start three months after income stops.
Mortgage Repayment Protection Insurance (MPPI): This insurance policy is usually taken out alongside a mortgage. Its benefits include mortgage payments for up to 12 months, and payments will generally begin three months after income stops.
Short-Term Income Protection Insurance (STIP): Short-Term Income Protection Insurance will help replace a portion of income for a set amount of time, usually between 12 and 24 months. This type of policy should not be confused with similar policies that will not pay out if the individual loses their job.
Click To Compare QuotesConsumers should be careful before considering purchasing any of the above policies—in some cases, this type of cover may already be included in an existing policy.
Some mortgage companies already provide Mortgage Repayment Protection Insurance for their clients, making purchasing another policy a waste of money.
Coverage Included in These Insurance Policies
All of the above-listed insurance policies will only provide coverage in certain situations, which include:
- PPI and MPPI generally cover loan and mortgage payments, not income loss. Some MPPI policies, however, may include an extra sum of money to help cover other bills and financial responsibilities.
- Even though the policyholder will pay premiums for many years, they will only receive payout benefits for a set period, generally around one year.
- STIP policies generally pay out between 50 and 60 per cent of a person’s income without being tied to debt repayments.
- Many of the policies outlined above will not pay out benefits immediately. There is usually a gap of three months between the loss of income and when the benefits begin, so filing as soon as possible is essential.
Reasons Why You Shouldn’t Purchase Income Protection Insurance
Before purchasing an income protection insurance policy, it is essential to do some research to avoid wasting money.
First, if the employer has announced redundancies or if there are whispers of potential job losses, it is wasteful to take out a policy that removes the ability to make a claim.
Additionally, if someone decides to take voluntary redundancy, they will not receive any benefits.
Click To Compare QuotesAlways check the terms and conditions of any policy carefully to ensure the insurance company will provide benefits.
Reasons Why You Should Purchase Income Protection Insurance
Even though there are reasons not to purchase Income Protection Insurance, there are also reasons why it should be bought:
- If the likelihood of redundancy at your place of employment is a medium to high risk within the next three to six months.
- If the person does not believe he or she will find another job within three months after the redundancy
- Confidence that 12 to 24 months of financial support will be enough
- Understand all of the exclusions for the policy
- Researching the best deal
For those interested in purchasing this kind of policy, it is important to compare policies and prices from different providers to find one that fits their lifestyle and budget.
It is generally not recommended to purchase these products through a loan or mortgage provider without proper research.