Income payment protection takes two principal forms. You can either purchase a short-term payment protection plan, or what’s known as a “life income protection cover plan.” What’s the difference between the two and why should you choose one over the other?
Short-Term Income Payment Protection
Short-term payment protection is designed to help people who become unexpectedly unemployed or suffer an accident or illness. Generally, these plans have a maximum length of two years, although each policy length is customised according to the wishes of the policy holder. In each case, the policy holder specifies a particular deferral period. This deferral period starts on the day that person loses their job and finishes a set number of weeks later. When the deferral period ends, the benefits from the policy begin. These benefits help each policy holder meet their financial obligations, including basic household expenses, mortgage payments and other financial duties. These policies frequently provide benefits of between 65 to 75 percent of a policy holder’s gross monthly income.
Life Income Protection Cover Plan
This type of plan is a form of disability insurance. Instead of having a set two-year limit, this plan is designed to provide income protection benefits to those of a certain age. Most plans of this type extend benefits to policy holders up to the age of 65 for a relatively low premium rate. Should a member suffer a debilitating accident or injury, a high percentage of his or her gross monthly income will be paid until they reach the age of 65.
Choosing Between the Various Plans
In general, a short-term payment protection plan would work out better for the vast majority of policy holders. This is because they offer greater flexibility in these volatile economic times. However, for those policy holders who have a lifestyle or occupation which exposes them to potential bodily harm, a life income protection cover plan can provide them and their loved ones with solid financial support in a time of need.
If you are considering buying payment protection cover, the best course of action is to make a written list of your expenses. Include your income and your anticipated purchases over the next five years. If you have a mortgage payment and/or children, you may want to purchase life income payment protection insurance. If you are self-employed or a sub-contract worker, short-term payment protection insurance may be better suited to your specific needs. In each case, buying payment protection insurance can ensure your most valued possessions will remain safe and secure.