While you could use your redundancy money if you had enough, this would make a big dent in it, especially if you were to be unemployed for many months on end. A better way of securing a monthly tax-free income is with income protection insurance. You would have to be able to maintain all of your outgoings if you did not want to see changes. This could include such as rent, mortgage, loan and credit card repayment. These are all essential as by getting behind on your mortgage means you are at risk of losing your home. Then you would have to take into account all other monthly outgoings. These include gas, electricity, food bills and any other outgoings.
When looking for income protection, go with standalone specialists for the policy. Check out several quotes in order to get the cheapest. All specialists will only sell payment protection and as such, you are assured of getting a quality product backed with experience. The terms and conditions should be checked as they can vary along with the cost. It is here where you can find valuable information about the protection. This includes when the cover would begin and end and mentions the exclusions that usually can be found in all cover.
The majority of providers offer policies that would begin to provide the policyholder with an income between the 30th and 90th day of unemployment. You can find that some providers will backdate the policy to the first day of becoming unemployed but not all do. Once you have started to receive an income that is tax-free, it would then continue for between 12 and 24 months. This will be stated in the key facts.
There has been problems in the past concerning payment protection products of which income cover is just one. This led to all polices being tarred with the same brush. Mis-selling was reported by the Citizens Advice and this led to an investigation into the sector. The Office of Fair Trading and the Financial Services Authority both made an investigation. The Financial Services Authority laid out guidelines that those selling payment protection, could follow. They also handed out fines to several well-known names on the high street before referring the sector to the Competition Commission. However, it is essential to remember that payment protection products can work.
The Financial Services Authority is planning to introduce comparison tables. It is hoped that they will make payment protection products more transparent. The family of payment protection consists of income protection, loan protection and mortgage protection. The tables will help the consumer to decide which policy would be the most suitable. This will be made possible by answering questions based on their circumstances. The tables will also highlight exclusions and make the consumer aware of the cost of a policy.
Simon Burgess is Managing Director of the award-winning British Insurance, a specialist provider of income protection, mortgage protection insurance and loan protection insurance.
