22/06/2022

10 mins

Income Protection is an insurance policy which pays you a replacement income if you can’t work due to accident or sickness. For this reason, it’s also known as Accident and Sickness Cover.

It provides loss of earnings protection for you and your family if an illness or injury keeps you from doing your job.

Most people would struggle to survive on minimal government benefits. Moreover, few have sufficient savings to see them through a real health emergency. For many people, Income Protection can therefore be an invaluable protection.

EXPERT OPINION 🤓
According to consumer group Which?, Income Protection is the one policy every working adult should consider.

How Do Insurers Calculate Income Protection Premiums?

To work out the cost of Income Protection, insurers take into account both policy and personal factors.

Policy Factors

These are options you choose when buying a policy. Policy factors impact how comprehensive your Income Protection is and therefore determine premiums.

You have control over most of these factors and can therefore use them to adjust your premiums if necessary. They include:

Level of Cover

The monthly benefit you’ll receive each month if you claim. Insurers will cover up to 70% of gross income. The greater your level of cover, the higher your premiums.

Cease Age

How long the policy runs for. Usually, you set it to match your expected retirement age. The older the cease age, the higher your premiums.

Deferral Period

The waiting period between you falling ill and being unable to work and the insurer paying your first monthly benefit. Longer deferral periods reduce premiums.

Claims Period

How long you’ll receive monthly payouts if you fall ill.

Short-Term Income Protection is a cheaper, budget option. It pays out for up to 1, 2 or 5 years per claim and then stops, even if you’re still too unwell to work after this period.

Long-Term Income Protection, meanwhile, pays out right up until retirement if you can’t work again. This will mean higher premiums but offers you more comprehensive protection.

Indexation

When you index your benefit, your monthly payout rises each year in line with the growing cost of living (inflation). This means the purchasing power of your monthly benefit stays the same over time.

To compensate for the payout rising, your premiums also rise alongside it.

Type of Income Protection Premiums

When you buy Income Protection, you pay via monthly premiums. There are two types of premiums to choose from:

Age-banded premiums
Age-banded premiums rise annually by a preset amount laid out in your policy documents. The increase is solely linked to your age and the growing risk of you claiming as you get older.
Guaranteed premiums
Locks in your initial premiums for the life of the policy. Your insurer can’t change them unless you’ve indexed the policy (in which case they’ll rise in line with your payout) or you make changes to your plan. While they’re more expensive to start with, it can be cheaper for long-term cover as the insurer can’t increase premiums over time.

However, guaranteed premiums aren’t automatically the best option for everyone. For example, manual workers often get better deals with age-banded premiums, so don’t discount anything until you’ve considered all your options.

IMPORTANT NOTICE 🧐
Beware reviewable premiums. These are common on inferior policies, such as Payment Protection Insurance (PPI). Here, the insurer can review your premiums upwards as it sees fit, perhaps if it has a spike in claims in a given year.

Personal Factors

Also impacting on the cost of cover are various personal factors. These are specific to you and you mostly cannot change them. They include your:

Age

As we get older, we become more susceptible to various illnesses and injuries. As such, you’ll face higher Income Protection costs the older you are when you buy a policy.

Occupation Risk Class

Some jobs are riskier than others. Office workers face lower risks of accident or injury in their daily working lives than firemen or scaffolders, for example. Premiums reflect the level of daily risk you face.

Smoker Status

Smokers are more likely to develop serious illnesses such as cancer and cardiac problems. The detrimental health impact from smoking means most — although not all — insurers charge smokers more for cover.

Health and Medical History

If you have a pre-existing medical condition, or a family history of certain conditions, the insurer may increase premiums to cover the risk or simply exclude that issue from your policy.

How Much Does Income Protection Insurance Cost?

Even when all personal and policy factors are the same, the Income Protection quotes you get can vary considerably between insurers.

Some insurers are more willing to take on risk than others. For example, many friendly societies are better for those in manual occupations compared with other providers.

That’s why it’s important to compare Accident and Sickness Cover from across the whole market to ensure you’re getting the best deal.

Example Income Protection Premiums

In the table below, we’ve highlighted the average cost of Income Protection for a manual worker (a plumber) and an office worker (an accountant) of three different ages.

The cheapest insurer for the accountant wasn’t the same as the insurer that worked out best for plumbers. Each provider considers occupations and other risk factors differently.

To get these quotes we’ve assumed each individual is:

In good health
Applying for an £1,500 a month benefit
Looking for guaranteed premiums that will never increase
Not going to index link the policy
Looking for cover up to the age of 65
A non-smoker
Looking for long-term cover rather than a policy which pays out for 1, 2 or 5 years
Choosing an 8 week deferred period
Covered on ‘own occupation’ basis, so they’ll get a payout if they’re medically unable to do their specific job.

Age at Application	Age 25	Age 35	Age 45
Occupation	Cost of Premiums per Month
Office Role Accountant	£24.05	£37.19	£58.32
Manual Role Plumber	£44.63	£68.99	£99.75

Accurate income protection quotes as of March 2022

IMPORTANT NOTICE 🧐
The premiums in the table are for fictional individuals. Your circumstances will likely vary which could mean your own premiums differ from those shown.

Working Out Your Own Cost…

Now you know what impacts the price of Income Protection, the most important part is comparing premiums from across the whole market to ensure you get the best deal.

Our Income Protection quote comparison tool pulls results from the top 10 UK insurers.

This makes it easy to calculate your potential monthly premiums in less than a minute. Alternatively, simply pop your details into the form below to get started.

If you need help don’t hesitate to pop us a call on 02084327333 or email help@drewberry.co.uk.

Compare Top 10 UK Insurers

Takes approx. 60 seconds

Or Call Us

Rated 4.92 / 5 by 3900 client reviews
4.9 / 5

Can I Reduce My Premiums?

Yes, if you know how — or have an adviser who does — there are a number of ways to keep the cost of Income Protection down. This lets you get the cover you need that fits your budget.

IMPORTANT NOTICE 🧐
Some ways to cut premiums impact how comprehensive your plan will be. To get the right balance it’s important to speak to an independent protection expert. If you need advice call us on 02084327333 or email help@drewberry.co.uk.

Reduce Your Cease Age

When will you likely be able to retire?

It’s an important question, as your cease age determines Income Protection premiums. The longer you need the policy, the higher your premiums will be due to the greater risk of an Income Protection claim as you age.

If you think you can retire slightly earlier, you could reduce your policy cease age to lower premiums.

However, only consider this if you’ll realistically be financially ready to retire earlier. With many the state pension age now standing at 67 or later for many, if you were in a long-term claim with a lowered cease age your policy would stop paying out before you can access your state pension.

Short-Term Cover Cuts Costs

Short-Term Income Protection is also known as low-cost or budget cover. While opting for a short-term policy — which will only pay out for 1, 2 or 5 years per claim — keeps premiums down, you risk your income drying up after this period if you’re in a long-term claim.

Short-term cover means that, even if you were so ill you could never work again, your policy stops paying out once your claims period is up.

Lower Your Level of Cover

How much do you need coming in each month to cover the basic necessities?

You’ll obviously need cover for important bills such as rent / mortgage, utilities, groceries, finance repayments, council tax and other essential outgoings. However, could you survive on slightly less money each month by cutting back on non-essentials if you were off work sick?

If you crunch the numbers and find that you can afford to get by on a lower proportion of your income, you could reduce the monthly payout from your policy to save money.

Increase Your Deferral Period

How long could you manage without an income before you’d need your policy to kick in?

If you have savings to live off or get sick pay from work, you could stretch your deferral period out to save money. The longer your deferral period, the lower the cost of your insurance.

A 13 week deferral period, for instance, could save up to 50% on premiums compared to a policy that pays out after 4 weeks.

Give Up Smoking / Choose a Smoker Neutral Insurer

Smokers pay more for Income Protection with most insurers. This is to compensate for the fact that they’re more likely to become ill, and more seriously ill, than non-smokers.

However, not every insurer hikes premiums if you smoke. Some are ‘smoker neutral’, so they treat smokers and non-smokers the same. Your adviser can direct you to such an insurer if you do smoke and it’s the right provider for you.

Alternatively, if you quit and go nicotine-free for 12 months, following a simple cotinine test (which detects chemicals from the breakdown of nicotine in your body) your insurer could cut your premiums.

Get Own Occupation Protection

Some insurers may offer low premiums because they are not providing own occupation cover. This is often the case for manual workers in particular.

At Drewberry, regardless of our clients’ jobs, we feel that it’s vital your insurer does cover you on an own occupation basis. This ensures your policy pays out if you can’t do your own specific job.

Avoiding Suited Occupation Cover

However, some insurers offer cover on a suited occupation basis. Here, before paying out, the insurer firstly assesses your health. If the insurer thinks you’re fit to do another job your skills and experience suit you to, the insurer won’t pay the claim.

Suited occupation cover can be fairly subjective and we therefore rarely recommend it. We tend to make sure the Income Protection we offer is own occupation cover. That way, clients can rest easy knowing they have the most comprehensive protection.

Compare Income Protection Quotes & Get Expert Advice

The cost of Income Protection can vary considerably depending on your personal circumstances and the choices you make regarding your policy.

There are a number of pitfalls to avoid. This includes policies with lesser definition of incapacity (for example, suited occupation cover), choosing premiums which can rise over time as well as paying over the odds for your plan if you don’t research the whole market.

Fortunately, if it’s all getting a bit confusing and you’d like some help, the team at Drewberry is here to help.

Why Speak to Us?

We started Drewberry™ because we were tired of being treated like a number.

We all deserve a first class service when it comes to issues as important as protecting our health and our finances. Below are just a few reasons why it makes sense to talk to us.

There is no fee for our service
We are an award winning 🏆 independent insurance broker who works with all the leading UK insurers
You’ll speak to a dedicated expert from start to finish
We are very proud of the 3900 and growing independent client reviews rating us at 4.92 / 5
Claims support when you need it most.
We are authorised and regulated by the Financial Conduct Authority. You can find us on the financial services register here 🧐

For help and fee-free advice, pop us a call on 02084327333 or email help@drewberry.co.uk.