Payment Protection Insurance is a tax free monthly benefit that is payable to you should you lose your income through accident, sickness or unemployment. For this reason it is also called ASU (Accident, Sickness and Unemployment) Insurance.

The amount you are able to claim per month (benefit amount) is usually based on a maximum monthly benefit that must not exceed a certain percentage of your income. In addition they may not be able to exceed any specific regular payment that you make for items such as Mortgage or Loans. This does not apply to Income Protection Insurance as is not tied to either a Mortgage or Loan.

The monthly payments are paid for a maximum set period of time (benefit period) for each claim, usually 12 months. There is normally a “waiting period” before you can claim and there are various choices dependent upon your own circumstances. After the maximum benefit period has ended the payments will cease until a new claim is made for a new period of accident, sickness or unemployment.

This type of policy does have exclusions, particularly for unemployment claims. The most important exclusion for unemployment is that if you are aware of impending unemployment before you take out the policy, or within a set time from the start of the policy, you would not be eligible to claim for that period of unemployment. There are also specific criteria for self employed or contract workers. Accident & Sickness claims are also subject to exclusions that will vary from each provider.

Points to look for when choosing payment protection insurance:

The benefit period: These vary between providers and range from 3 months to 24 months and your choice will depend on how long you think you may need to claim for each individual claim; the longer the claim the higher the monthly premium. Ant Insurance offer a 12 month benefit period that is the industry standard.

The benefit amount is variable between 50-60% of either you’re net or gross monthly income to a maximum monthly benefit between £1000 and £2000 whichever is the lesser. For Mortgage Payment Protection this can only be for the amount of your monthly mortgage repayments plus any additional allowances permitted under the policy.

Ant Insurance offer 50% of your gross monthly income to a maximum monthly benefit of £2000 for Mortgage Protection (whichever is the lesser) and 60% of your net monthly income to a maximum monthly benefit of £2000 for Income Payment Protection (whichever is the lesser).

The waiting period: If you have little savings and no good company benefits the best choice is Back to Day One cover. This means that if, after 31 consecutive days of unemployment and you are still unable to work, your claim will be backdated to the first day of the 30. If you have some savings you might want to consider an “excess period” that ranges from 30 to 120 days. Ant Insurance offer a choice of Back to Day One cover or 30 day excess.

The exclusion period: You should try to obtain the shortest period possible, these range from 60 days up to 180 days. The shorter the exclusion period the better your changes of having passed it before you may learn of redundancy. Ant Insurance offer a 60 day exclusion period for Mortgage Payment Protection Ant Insurance offer a 90 day exclusion period for Income Payment Protection.

General Exclusions: All policies will have exclusions for unemployment or accident and sickness claims; compare between policies to ensure you have the one best suited for your needs. Ant Insurance is one of the few who do not disallow a claim if you are dismissed for misconduct, dishonesty or failure to hit sales targets.

Multiple Payment Protection Policies: Some providers treat Mortgage and Income Payment Protection policies as the same and therefore the combined monthly benefit of both policies must be taken when calculating the benefit amount you are allowed. If you wish to have a Mortgage Payment Protection and an Income Payment Protection to maximise on your monthly benefit look for a company that will allow you to have both to their maximum amount allowed. Ant Insurance will allow you to have a maximum monthly benefit of £2000 for Mortgage Payment Protection and £2000 for Income Payment Protection therefore potentially allowing you £4000 of monthly benefit so long as neither individually exceeds the permitted maximum benefit amount.

All prices will vary between providers, the cheapest does not necessarily mean the cover is poor and by the same token the most expensive does not guarantee good cover. Read the Policy Summary and the Terms and Conditions carefully paying the most attention to the “Exclusions” sections. If in any doubt about your particular circumstances all companies will have a Customer Services Department and you should ring and make enquiries.

Online companies will always have their Terms and Conditions and Policy Summary either downloadable or printable. At Ant Insurance we always advise our customers to get a cup of coffee and read the Terms and Conditions before they buy our or any payment protection policy– it will be the wisest 15 minutes you will spend.

Payment Protection has had some bad press recently but equally hundreds have benefitted from it; saving their home or their lifestyle at the worst times of their lives. When it fails to deliver it is usually because customers have not taken those valuable 15 minutes to ensure the policy is suitable for their circumstances will pay out when they need it most.