Income Protection Insurance (IPI), formerly called Permanent Health Insurance (PHI), is an insurance policy that pays benefits to policyholders who are incapacitated and are unable to work due to illness or accident. Its benefits include:
- The benefits of this policy are payable when the policyholder has become incapacitated and after the deferred period has passed until the earliest of death, recovery of health, retirement or the term of the contract.
- These are paid regularly (usually weekly or monthly).
- They may be free of tax.
- A waiver of premium option may also be provided in some income protection insurance policies.
- Renewable IPI- Renewable policies give the policyholder a right to renew the policy at a later period.
- Reviewable IPI- The premiums of such policies are reviewed every few years although their terms are the same as that of fixed policies.
- Increasing IPI- The benefits of increasing IPIs increase after a period of time to mitigate the losses due to inflation. Their premiums usually increase as well.
- Unit-linked IPI- such policies have an investment element similar to unit-liked life assurance policies. And hence, they also have a surrender value.
- Group IPI- employers may buy group IPIs for their employees.
While nobody expects such a tragic interruption to befall upon them, they must face it: accidents and sicknesses strike when one least expect them. Better safe than sorry, right?