A period of time known as the deferred period will elapse between the start of the illness or injury and the point at which benefits begin to be paid. Common deferred periods are 4, 13, 26, 52 and 104 weeks. The minimum four-week deferred period is to prevent multiple claims for minor complaints such as colds or flu.

A self-employed person, who may well suffer loss of income after being unwell for a very short time, should opt for a shorter deferred period. An employee may wish to opt for a longer deferred period, especially if they have sickness benefits paid by their employer. If this is the case, the deferred period should be set to match the date on which the employer’s sick pay ceases to be paid out. The longer the deferred period chosen, the cheaper the premium.

These benefit levels are set so that the person is unable to receive a higher income when they are not working than they could from actually working. The highest benefit amount payable from an IPI policy varies between each provider, but is normally in the range of 50% to 75% per cent of pre-disability earnings. If the provider allows a benefit level towards the top of this range, they will be more likely to make a deduction to allow for any benefits the claimant might have made. These limits apply to total benefits from all IPI contracts held by the individual.

Benefits are paid pro-rata if illness means that a person can still work, but unfortunately earns less than they did before their illness or injury. They might be able to work part-time only, or be on a lower salary than before, for example.

Cover is permanent in that the insurer cannot cancel the cover simply because the policyholder makes numerous claims. IPI used to be commonly known as ‘permanent health insurance’.

The policy can be cancelled, however, if the party involved fails to keep up payments or takes up a dangerous job or hobby.

Some policies will allow benefits to be index-linked (either before or during a claim). The rate of increase may be fixed, sometimes 3% to 7% depending on the circumstance, or based on a published measure of inflation. Benefits are normally paid until death, return to work, or retirement, or whichever occurs first.