In this article, we explain how much income protection insurance costs and which factors will make it more or less expensive. Income protection insurance is also called sick pay insurance and provides a replacement monthly benefit in situations where the insured person becomes unable to work due to illness or injury.
Covering your income can prevent financial hardship caused by lost earnings if you become unable to work due to illness or injury and the average cost of income protection insurance is less than you may think. The amount you pay each month will depend on a number of factors which we explain and we show you how to get up to £100 cashback* when you buy your income protection cover too.
What is income protection insurance?
Income protection insurance is a personal insurance policy that will pay you an income if you become unable to work due to illness or injury. Income protection insurance will protect you against loss of income caused by incapacity so that you have peace of mind that you can continue to pay your bills and maintain your lifestyle.
The policy can be tailored so that it compliments the sick pay that your employer may pay you or how well you can support yourself if you find yourself unable to work. Income protection insurance is sometimes referred to as sick pay insurance or permanent health insurance and individuals or your employer can arrange it may provide this type of insurance as part of your benefits package. Most types of occupations can be covered using income protection insurance but you may require specialist income protection advice if your job carries extra risk of illness or injury or if it is particularly labour intensive.
How much does income protection insurance cost?
The cost of income protection insurance depends on a number of factors such as age and the level of cover you choose but there are other factors that you should consider too as they could help you reduce the cost of your insurance. You should also compare income protection insurance cover across a number of insurers to make sure you are getting the best deal.
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How much can I expect to pay for income protection insurance?
The cost of income protection insurance will vary from company to company but I have shown below some examples to give an idea of the likely monthly cost.
Monthly cost of £1,500 income protection insurance
| Age | Monthly benefit | Cover to age: | Waiting/Deferral period | Monthly premium |
| 30 | £1,500 | 65 | 4 weeks | £35 |
| 40 | £1,500 | 65 | 4 weeks | £40 |
| 50 | £1,500 | 65 | 4 weeks | £55 |
The above rates are a general guide and based on someone working in a clerical position who has no pre-existing medical conditions and is a non-smoker. Costs vary for the reasons stated above. To get a personal quote I strongly recommend using the service detailed below.
What factors affect the cost of income protection insurance?
Income protection insurance costs can be tailored to suit your specific needs and there may
Amount of income covered
Income protection insurance benefits can be up to 70% of your gross income, but lower amounts can be covered. Insurers offer varying levels of cover depending on the percentage of your income that they offer as a maximum so if you need more of your income covered, you may have to select the right insurer for your needs - we tell you how to do this later in the article. The minimum that should be covered is the amount of your basic bills such as mortgage, food and utility bills. The lower the amount of cover you have the lower the monthly premiums. Importantly, you will still be able to receive statutory sick pay (SSP) in addition to any benefit that is paid out under your income protection insurance.
What will prompt an income payout?
Income protection insurance can cover sickness, accident, redundancy or any combination of these three. The extent of cover will be reflected in the cost of your monthly premiums and in the choice of insurer as some do not offer redundancy/involuntary unemployment insurance. For sickness and accidents, the insurer will usually ask for medical proof that you are unfit to work. Unlike critical illness insurance which covers specific illnesses, income protection claims are usually paid if you stop working due to any sort of incapacity.
When will income payments start being paid?
With all income protection insurance policies there is a deferred period built in. The deferment period is the period between first being off work and when the benefit begins to be paid to you. This is typically between one month and three months but can be up to 12 months. The longer the deferred period on an income protection insurance policy the lower the premium.
How long will income payments continue?
You can choose between long-term and short-term income protection. Long-term income protection insurance will keep paying your monthly benefit for as long as you are unfit to work and only pays out until you return to work or reach the end date of the policy. Short-term income protection can be set up to pay your benefit for 1, 2 or 5 years per claim so each claim is limited to the period of time that you choose but multiple claims are possible.
Medical history
If you have a history of health issues your premiums are likely to be higher to reflect the increased risk of you being off work. Alternatively, the specific medical condition you suffer with or have suffered with may be excluded from the insurance so you can't claim if it prevents you from working in the future. When you apply for income protection insurance you will be required to complete a health questionnaire which will be used to set the premiums on your policy.
Age
The older you are the higher the income protection premiums will be as you are more likely to be off work sick than a younger person.
Occupation
Some occupations are riskier than others with regards to illness or injury and this will be reflected in the income protection premiums. If your job requires you to carry out manual tasks, you will likely pay more for income protection insurance but you can source specialist income protection insurance that may be cheaper by speaking to an income protection broker* who will assess your occupational tasks and source the best value income protection insurance for you.
What type of monthly premium to choose for income protection insurance
The type of monthly premium you choose determines, not only how much you pay but also how this may change from time to time. Understanding the different types of monthly premiums on offer with income protection insurance and how these work can guide you to the best options for you and prevent any surprises in the future.
Guaranteed premiums for income protection insurance
A guaranteed monthly premium is guaranteed to remain the same amount for the life of your insurance cover which makes it attractive to those who want to fix the cost of their income cover. The monthly premiums are guaranteed at the outset so they will not increase over time. However, you may have to pay more in order to enjoy this guarantee of a fixed price and you may find that some providers do not offer guaranteed premiums.
Reviewable premiums for income protection insurance
The premiums will be reviewed at intervals detailed within the policy terms. At each review, the insurer will decide whether the premium needs to be adjusted based on claims experience across other customers and rates of incidence of medical conditions in general. There is usually no cap to how much the premium can be adjusted but these premiums are usually cheaper than guaranteed premiums at the outset of the policy. You may find that a reviewable premium is more affordable but you should weigh this up against potential future increases in case these make the insurance unaffordable to maintain.
Age-banded premiums for income protection insurance
These premiums will increase each year with your age and are usually cheaper than guaranteed premiums. Many insurers provide a table to show the increases for each year so future premiums are predictable unlike they would be with reviewable premiums. You may find this a good compromise if you don't like the sound of a reviewable income protection insurance and the guaranteed one is too expensive.
How to find the best and cheapest income protection insurance policy
The best way to compare income protection insurance quotes is by speaking to an independent income protection specialist as they will be able to access every quote on the market and so can advise on the best possible policy for your unique circumstances. Accident, sickness and unemployment policies can seem very similar to income protection policies but there are some important differences that an adviser can help you to understand so that you choose the right type of cover for your needs.
LV=, Aviva, Legal & General and Royal London are some of the mainstream insurers that provide income protection insurance and often quote the best prices for this type of insurance. However, other lesser-known insurers such as British Friendly, Shepherds Friendly and Wesleyan could provide cover that is better suited to your needs if you wish to keep your costs down or if your occupation is difficult to cover. Comparing the cost of income protection insurance can be tricky due to the varying quality of cover you will find from different insurers and some insurers will provide more than one tier of insurance to provide customers with options that allow them to balance cost with quality. Budget options will have to be considered carefully as they can reduce the cost of income protection but you must understand the limitations.
You can also buy critical illness insurance that pays out a lump sum for more serious types of medical conditions - you will find information about this type of cover in our article, "Best and cheapest critical illness cover in the UK".
I have personally vetted the service of one of the UK's leading independent income protection specialists*, where the advisers are experts in searching the whole market in order to find the most suitable income protection cover
There is no obligation to take things further, simply complete the form via the link below and if you decide to take out a policy, you will qualify for up to £100 cashback.
Further reading
- Do I need income protection insurance?
- What is the difference between ASU and income protection insurance?
- Should I take out income protection insurance through my employer?
- Can you have joint income protection insurance?
If a link has an * beside it this means that it is an affiliated link. If you go via the link, Money to the Masses may receive a small fee which helps keep Money to the Masses free to use. The following link can be used if you do not wish to help Money to the Masses and do not wish to qualify for the cashback referred to in the article - LifeSearch
