The acronyms IPI and PPI are easily confused. IPI refers to Income Protection Insurance and PPI is Payment Protection Insurance. Although they may sound similar and in some ways offer the policy holder protection against losses caused by a loss of income, they are two very different types of insurance, designed to cover different situations.
IPI policies offer coverage that will compensate the policy holder for loss of income caused by illness or injury that prevents the insured person from working to earn a living. PPI covers the inability to make loan repayments, such as for a mortgage, due the policy holder not being able to work and earn an income due to sickness or injury. In other words, while IPI will protect the policy holder against loss of income, PPI only offers coverage against inability to meet loan repayment commitments. Both types of insurance have their plus points, but determining which one is right for you requires a clear understanding your financial situation.
The income of a salaried person is used for three purposes – the meet living expenses, pay off loans and increase savings. A loss of income affects all three. If you have IPI, during the period when you are unable to earn your regular income you will receive monthly payments equivalent to a significant proportion of your salary. It will not be the full amount of your normal income, but with some cut backs on your living expenses and postponing any additions to you savings, a properly designed Income Protection Insurance policy will enable you to meet your loan repayments obligations and living expenses.
Payment Protection Insurance on the other hand will cover only your loan repayments and will not provide any protection against the other applications that the lost income is used for. This shortfall will have to be made up, if possible, in other ways.
The choice between IPI and PPI or having both types of insurance depends on a person’s financial situation. If there are other financial resources that can be drawn upon to tide over the no income period or if another member of the family is earning enough to meet living expenses, then PPI may be a viable option. However, generally speaking, the greater financial protection that IPI offers makes it a more attractive proposition. To know which type of insurance is best suited to your individual and family’s financial needs, call Allied Brokers. We will work with you to identify the policy the will offer you the best protection and financial security.
Visit our website at www.alliedbrokers.com for information about all the types of insurance we offer. Or call 1-888-505-7988 for a free rate quote.