Learning the Restrictions Associated with an IPI
Each income protection insurance policy includes restrictions and exclusions that may limit a policyholder’s cover. When you purchase income protection insurance, or IPI, it’s imperative to review these restrictions carefully so that you are aware of the scope of your financial protection. You can learn about these restrictions by reading the policy wording, which is included with the documents that an insurance company provides.
The key features brochure of an IPI policy will detail the restrictions of a policy in a condensed form. You can request a key features document from an insurance provider before you buy coverage to ensure that you understand the exclusions of a policy. Ask a representative from the insurance company to clarify any exclusions that are not fully explained in the policy documents.
Restrictions on IPI Payouts
The payouts from IPI will prove extremely useful if you should be unable to work because of a severe illness or debilitating injury, but IPI benefits will not replace your entire income. IPI payouts are restricted to a set percentage of your gross earnings, generally 50 to 70 percent, depending on how much you earn and the extent of your coverage. Insurance providers limit IPI payouts in order to encourage their policyholders to return to work rather than relying on their benefits for financial support.
After you become unemployed, your weekly or monthly IPI payouts will not begin right away. Once your claim has been authorised, you must wait for the deferred period to end before you will begin receiving your benefits. As the policyholder, you have the right to select a deferment period that suits your financial circumstances. Many policyholders choose a deferred period of 3 to 6 months; however, your insurance provider may give you other options.
IPI payouts will continue until you go back to work, reach state pension age or pass away, or until your contract with the insurance company expires. The term of your contract may affect the cost of your coverage. Because of the restrictions imposed on the amount and duration of IPI payouts, most policyholders must rely on addition sources of financial support, such as state benefits or personal savings, when they become unemployed.
Excluded Medical Conditions
The primary purpose of IPI is to provide financial protection against unemployment caused by injury or illness. Some short term income protection policies may pay out for unemployment caused by redundancy, as well. Whilst IPI covers a wide range of health related circumstances, this product excludes a number of medical conditions. If you have a pre existing illness, IPI will generally not pay out if you become unemployed because of that condition. However, coverage and exclusions may vary from one insurer to the next.
Most IPI policies exclude deliberately self inflicted injuries, drug or alcohol abuse and injuries caused by war or terrorism. IPI also excludes pregnancy, which is covered under Statutory Maternity Pay through one’s employer. IPI will not pay out for minor illness or short term physical ailments, such as colds or muscle strains. However, employees may claim Statutory Sick Pay through their employer if they are unable to work for four or more days in a row because of an illness or injury.
Learning the restrictions associated with an IPI policy will help you and your family prepare for a period of unplanned unemployment. Most households must amend their budget and draw from several resources to cope with an extended loss of income. State benefits are available to assist employees who cannot work for health reasons. Having an emergency strategy in place will help you to prepare for any eventuality.