Last updated 21 July 2016

The Benefits of Income Protection Insurance

The Benefits of Income Protection Insurance - Expatfinder.comIncome protection (IP) insurance, or permanent health insurance, is designed to recoup lost earnings in the event a worker loses the capacity to earn. IP insurance, in contrast to common perception, is not restricted to debt protection. This insurance coverage provides tax-free pay-outs equivalent to 50%-60% of an insured’s monthly salary within a number of years.



Despite the many advantages of IP insurance, only a few expats purchase these plans. Expat-oriented website The Guardian revealed that 23% of expat families have pet medical plans compared to 10% of those who have IP insurance coverage. Expats are yet to be educated on the benefits of this insurance coverage.



IP insurance is highly recommended for self-employed expats. Entrepreneurs and freelance workers are at a greater risk of financial turmoil compared to their employed counterparts who are adequately covered by their employers in the event of disability.



IP insurance plans may be classified into Long-term Income Protection and Short-term Income Protection.



Long-term Income Protection

The Long-term Income Protection insurance is also known as Critical Illness Protection plan. This type of insurance pays a worker equivalent to his regular income in the event he is unable to report for work. This insurance plan, however, does not cover unemployment. The insured shall receive the insurance proceeds in a fixed lump sum amount.



Short-term Income Protection

The Short-term Protection insurance covers three circumstance: Accident, Sickness and Unemployment. These three factors may all be in one plan or may be covered by separate plans. In the event that the insured in unable to work due to the aforementioned reasons, he will receive a monthly pay-out equivalent to 50% of his gross monthly income. The proceeds are payable within 12 months and up until the insured is able to work. The coverage, however, does not cover unemployment occurring within 120 days from the date the policy was issued.



For concerns regarding claims, a monthly medical certificate from a registered doctor is needed as a form of evidence.



IP Insurance does not cover the following conditions and circumstances:

  •     Childbirth
  •     Pre-existing medical conditions (Illnesses/health problems that have been diagnosed prior application)
  •     Self-inflicted injury
  •     Alcoholism and Drug abuse
  •     Disabilities and illnesses brought by criminal acts
  •     Disabilities and illnesses brought by involvement in war, riot, invasion or terrorism
  •     Participation in dangerous sports or other harmful activities that were not advised upon application for insurance (e.g. mountain cycling, skydiving, jet skiing, motorcycle riding)


    KEYWORDS: Income Protection, Insurance, Expat

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