Income protection insurance

Income Protection Insurance (IPI) is an insurance policy, available principally in Australia, Ireland, New Zealand, South Africa, and the United Kingdom, paying benefits to policyholders who are incapacitated and hence unable to work due to illness or accident. IPI policies were formerly called Permanent Health Insurance (PHI).

The original provider for this type of insurance is the Original Holloway Friendly Society, based in Gloucester. It was founded in 1880 by George Holloway.

Income protection insurance policies offer a number of benefits in comparison to other insurance policies such as accident, sickness and unemployment insurance or personal accident and sickness (PAS):

There are a number of restrictions that can affect a policyholder's eligibility for income protection insurance:

In addition to standard fixed-premium Income protection insurance policies there are a number of variations available from some life offices:

The choices involved and the potential for confusion and buying the incorrect product means it is considered essential that consumers consult an Independent Financial Adviser (IFA).

IPI policies are relatively expensive due to the guarantees offered by the policy. However, premiums decrease as the deferred period increases and choosing a 'suited occupation' or 'any occupation' option over an 'own occupation' will likely reduce the cost of the policy. In 2014, some insurers launched a new variant called as "Guaranteed Age Rated". In this option, the pricing will go up as the policy holder gets older, but the pricing term i.e. by how much the premium is guaranteed on basis of a table that is provided at the inception of the policy.

Premiums paid by employers to provide cover for their employees are tax-deductible as a business expense and are a taxable benefit to the employee. Benefit payments paid from the policy, following an accident or illness affecting the policyholder, are free of income tax and National Insurance contributions for individual policies. For group policies, benefits are paid as taxable and NIable earnings.

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