Income protection insurance (IPI) is a long-term insurance policy that pays benefits to policyholders who are incapacitated and hence unable to work due to illness or accident. It is available principally in Australia, Ireland, New Zealand, South Africa, and the United Kingdom. The same concept is instantiated in the United States as disability income insurance. The policy provides regular payments that replace part of your income if you’re unable to work due to illness or an accident. It covers a wide range of illnesses, conditions, and situations, so it’s important to compare what different insurers can offer you. The cost of the policy is affected by several factors, including your age, occupation, whether you smoke or have smoked, the percentage of income you’d like to cover, the waiting (or deferred') period until the policy pays out, and the range of illnesses and injuries covered.
IPI is important because it helps protect your income in case you're unable to work due to sickness or disability. It provides income to help pay for essential living expenses, such as rent, mortgages, car payments, food, etc., and allows you to meet your day-to-day financial obligations. The policy pays out a monetary benefit to your beneficiary in the event of your death, which can be used for a wide variety of purposes, including final expenses, income replacement, paying off mortgage and other debts, childcare/education costs, and other short- and long-term expenses.
