PPI v Income Protection – What’s The Difference?
Jabran Matharu
Posted On April 11, 2018
Many people often get confused between Payment Protection Insurance (PPI) & Income Protection, so we’ve put together this article to explain the differences…
Income Protection
What is it?
Income protection insurance is designed to replace a percentage of your income if you are unable to work due to illness or injury. Income protection insurance can be either a short or long term policy with premiums paid monthly.
What is it for?
The policy will pay out a monthly amount which can be used for any purpose. It is typically around 70% of your gross income and should be enough to cover mortgage payments and basic bills. It continues to pay out either until you are fit to return to work, or you retire. What you spend the money on is entirely up to you- there are no restrictions. Income protection is suitable for anyone who relies on their salary to pay their bills and maintain their lifestyle.
PPI
What is it?
PPI (Payment Protection Insurance) is normally sold in conjunction with a loan, on the on the basis that in the event of you being unable to work, the loan will be protected by the PPI plan. In recent years it has been all over the news and in the tabloids due to the mis-selling of the policy, as the products were not suitable for everyone. Many people were not even aware that they had PPI, and are now claiming back what they are owed.
What is it for?
PPI will typically payout 30 days after the policyholder stops working and payments will usually continue for 12-24 months. Any payments made under a PPI are made directly to the loan provider, not to the policyholder. PPI is suitable for people who don’t want their whole income protected, just a particular debt payment to be covered short-term.
So, there you have it, the main difference between the two is that PPI covers any loans you have and is paid directly to the loan provider if you can’t work, income protection is paid directly to you to help cover living costs should you be unable to work. Many people feel they have been forced into buying PPI whereas income protection is a completely optional way to ensure financial stability should you be unable to work.
