Permanent health insurance, also referred to as Income Protection Insurance (IPI), is a UK insurance policy. The policy is designed to pay benefits to incapacitated policyholders who cannot work because of an illness or permanent injury. This type of insurance is also known as income replacement insurance, disability income insurance, personal disability insurance and long-term disability insurance.
What are the product variations under Income Protection Insurance?
Permanent Health Insurance or Income Protection Insurance (IPI) has the following variations, apart from the standard fixed-premium IPI policies:
Renewable IPI – Under this, the policyholder can get the policy renewed with an increase in cover. The period is usually set at five years, given the prevailing premiums paid by people of the same age group and occupation. At the outset, the premiums will be cheaper as opposed to a fixed IPI policy and later on, as the insured ages, the premium amount will increase with each renewal.
Reviewable IPI – This variation is the same as a fixed policy but a review (increment) of the premiums is conducted. General rates are taken into consideration, not claims or the health of the policyholder. The review is performed every few years by the life office. Premiums will be cheaper initially for this type of policy, as compared to a standard policy.
Increasing IPI – Inflation erodes the value of the benefits to be paid by a fixed-benefit policy. Due to this, one should opt for policies with increasing benefits. Every few years, the policyholder can choose to increase the benefits by a certain percentage or the increment can happen at a fixed percentage or at an indexed rate, for example the Retail Prices Index.
Unit-linked IPI – There is no investment element in other IPI policies. Therefore, there is no surrender value. But there is an investment element in a unit-linked policy, as is the case with unit-linked life assurance policies. The presence of the investment element is an indicator of expensive premiums, as opposed to standard policies. Moreover, if the return on the invested premiums is low, the amount of the premium could be even more expensive.
Group IPI – This policy is provided by employers for their employees. There could be a maximum payout period in case of group policies. In the event of an employee resigning, the policy expires.