Cost of Income Protection Insurance – The cost of income protection insurance varies depending on several factors, including the specific coverage you choose and your individual risk profile. The price of the insurance policy is personalized to each person based on their circumstances and needs.
Income protection insurance is designed to provide financial security in the event of a loss of income due to medical reasons. It offers peace of mind by ensuring a steady stream of income even if you are unable to work.
Having this type of coverage is particularly important if losing your income would have a significant impact on your financial situation. Most people have financial commitments and dependents that rely on their income, and sudden loss of income can have severe consequences for household finances.
When considering income protection insurance, it’s crucial to find a balance between the coverage you require and the monthly premiums you can afford. The price of the insurance is influenced by various factors specific to each individual.
To determine the cost of income protection insurance for you, it is advisable to consult with insurance providers who can provide personalized quotes based on your unique circumstances. This will help you assess the coverage options available to you and find a policy that meets your needs while remaining within your budget.
What affects the cost of income protection?
The cost of income protection insurance is determined by various factors, including the specific coverage you select and several personal factors related to you. These factors include your age, health, and lifestyle, which insurers take into account to assess the level of risk associated with insuring you. The following variables can influence the cost of income protection cover:
- Coverage amount: The amount of monthly payments you would receive if you made a claim.
- Policy term: The duration for which you are insured.
- Waiting period: The time between losing your income and when insurance payments begin.
- Full-term or short-term cover: The maximum length of time the policy would pay out per claim.
Since income protection is a health-related insurance product, your own characteristics significantly impact the cost of coverage. Insurers will inquire about the following aspects to assess your risk profile:
- Personal health history
- Family health history
- Height and weight (BMI)
- Smoking status
- Lifestyle factors (e.g., hobbies)
- Occupation
Your responses to these questions provide insurers with insights into the likelihood of you making a claim on your income protection policy. Individuals with pre-existing health conditions or occupations considered higher-risk (such as construction work) may be charged higher premiums compared to those without health conditions and with lower-risk occupations (such as office work).
By considering these factors, insurers calculate the cost of income protection insurance tailored to your specific circumstances. It’s important to provide accurate and detailed information to ensure an accurate assessment of risk and to obtain a suitable and affordable policy.
Typical income protection policy prices
Based on Smoking Status
The following prices are based on:
- 30-year-old male or female office worker
- £1,500 level income protection cover until retirement (38 years)
- 13 week waiting period
- Own occupation incapacity basis
| Insurer/product | Non-smoker | Smoker | Anorak review |
|---|---|---|---|
| Aegon Personal Income Protection | £34.72 | £45.01 | Read our Aegon income protection review |
| AIG YourLife Plan Income Protection | £34.02 | £54.03 | Read our AIG income protection review |
| Aviva Income Protection+ | £26.65 | £35.17 | Read our Aviva income protection review |
| Legal & General Income Protection | £24.39 | £32.76 | Read our Legal & General income protection review |
| LV= Income Protection | £27.64 | £35.90 | Read our LV= income protection review |
| Royal London Personal Menu Plan | £25.75 | £36.05 | Read our Royal London income protection review |
| VitalityLife Income Protection | £29.89 | £43.76 | Read our VitalityLife income protection review |
Quoted on 14/04/21
Based on age
The following prices are based on:
- Healthy, non-smoking male or female office worker
- £1,500 level income protection cover until retirement
- 13 week waiting period
- Own occupation incapacity basis
| Insurer/product | 25 year old (43 years’ cover) | 35 year old (33 years’ cover) | 45 year old (23 years’ cover) | Anorak review |
|---|---|---|---|---|
| Aegon Personal Protection | £30.51 | £39.91 | £47.96 | Read our Aegon income protection review |
| AIG YourLife Plan Income Protection | £30.25 | £43.27 | £61.31 | Read our AIG income protection review |
| Aviva Income Protection + | £22.97 | £32.48 | £51.61 | Read our Aviva income protection review |
| Legal & General Income Protection Benefit | £21.62 | £27.60 | £50.54 | Read our Legal & General income protection review |
| LV= Income Protection | £22.38 | £33.72 | £51.67 | Read our LV= income protection review |
| Royal London Personal Menu Plan | £21.35 | £33.03 | £58.32 | Read our Royal London income protection review |
| VitalityLife Income Protection | £25.01 | £36.21 | £66.15 | Read our VitalityLife income protection review |
Quoted on 14/04/21
What waiting period should I choose?
Every income protection policy includes a waiting period, which is the duration between the loss of income and the initiation of income protection payments. Insurers typically offer waiting periods of 1, 4, 8, 13, 26, or 52 weeks. Shorter waiting periods result in higher premiums, while longer waiting periods lead to lower premiums.
It may seem tempting to opt for a longer waiting period to reduce premiums, but it’s crucial to consider whether you would be financially capable during the waiting period. Many individuals rely on sick pay, savings, or assistance from others to manage their finances during this time. Similarly, if you choose a shorter waiting period because you require immediate insurance payments, you must ensure that the monthly premiums remain affordable throughout the policy’s duration.
When selecting a waiting period for your income protection policy, it’s important to strike a balance between affordability and your financial stability during the waiting period. Carefully assess your circumstances and financial resources to make an informed decision that suits your needs.
Should I buy short-term or full-term cover?
The type of cover you choose is another significant factor affecting the cost of your policy. The distinction lies in the maximum duration for which the policy will pay out per claim:
- Short-term cover offers a maximum benefit period per claim, typically ranging from 1, 2, or 5 years, depending on your selection at the time of purchase.
- Full-term cover does not have a maximum benefit period. It continues to provide payments until you recover and can return to work, or until your policy ends or you retire, whichever comes first.
Both types of cover allow for multiple claims while you are insured, even for the same illness or condition. However, some insurers may require a minimum period between claims for short-term cover.
It is important to note that short-term cover ceases payments after the maximum benefit period, even if you are still unable to work. Therefore, if your illness or injury extends beyond the payment period, you may be left without an income. Short-term cover is generally more affordable than full-term cover but can still be highly valuable and sufficient if you experience intermittent periods of ill health or injury throughout your life. Both options can provide crucial financial support when needed, but if it is within your means, full-term cover offers the ultimate peace of mind.
key takeaways
- Income protection covers you if you lose your income for any medical reasons
- The price of income protection will be different per person because it depends on the cover you buy and how much of a risk you are to insure
- Your age, health and lifestyle all contribute to the cost of income protection
- Having a health condition or a risky hobby or occupation can make it more expensive to get covered
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FAQ’s Cost of Income Protection Insurance
What is the average cost of income protection insurance?
The cost of income protection insurance can vary significantly depending on the individual purchasing the cover and the specific details of the policy. It is challenging to provide an accurate average cost due to the various factors involved. The price is influenced by factors such as the individual’s profile (age, health, lifestyle) as well as the characteristics of the coverage itself, including the type of policy, coverage term, insured amount, and waiting period.
Why is income protection so expensive?
Income protection insurance offers extensive coverage in the event that you are unable to work due to health reasons. Insurers typically provide a monthly income benefit equivalent to approximately 50-60% of your salary. Choosing short-term coverage instead of full-term coverage can help make the insurance more affordable. Likewise, opting for a longer waiting period before your income protection payments begin will result in lower monthly premiums.
Is it worth having income protection insurance?
Experiencing a severe illness that renders you unable to work can have significant and enduring financial implications. Income protection insurance is a valuable investment if you prioritize the peace of mind that comes with knowing that a long-term illness won’t jeopardize your financial stability. If the potential risks of being without coverage are substantial in your particular situation, income protection is definitely worth considering.
What doesn’t income protection cover?
Income protection insurance specifically focuses on providing coverage for the loss of income due to health-related issues and does not typically extend to situations such as redundancy or unemployment. Standard policies are designed to protect individuals in case they are unable to work due to any medical reasons. However, it is important to note that there may be certain exclusions in your policy based on the health information you disclose during the application process.