Low Cost Income Protection Insurance

How Much Does Income Protection Cost?

It’s hard to say exactly how much Income Protection costs for each individual because it depends on so many different factors. For instance, when setting up a new policy you’ll need to consider:

• Your age
  The older you are when you take a policy out, the more premiums will cost due to your increased of claiming as you age
• Your health
  If you have any pre-existing medical conditions, or a family history of certain conditions, the insurer may increase premiums to cover the risk or simply exclude that issue from coverage entirely.
• Occupation
  As some occupations are riskier than others the cost of your plan will vary depending on your job duties. The lowest-risk occupations are office-based roles and the riskiest are those involving lots of manual work or those roles where doing that job will be hard even with a minor injury, such as flying a plane.
• Your smoker status
  Smokers are more susceptible to various health problems, including cancer and heart / circulatory disease and most insurers charge smokers higher premiums. Going nicotine-free for 12 months could potentially halve the cost of Income Protection.

• Your level of cover
  The amount you’ll require as a payout from the insurer each month to keep up with your essential outgoings. The higher your level of cover, the greater your premiums.
• Your cease age
  The age at which you want your policy to finish — typically this will be your expected retirement date.
• The deferral period
  How long you can wait before the insurance will kick in and pay out after you’re signed off work sick, with a longer the deferral period lowering the cost of your insurance.
• The claims period
  How long you can claim for should you fall ill, which could be a maximum of 1, 2 or 5 years for short-term policies or right up until your retirement age for long-term Income Protection.
• Indexation
  The prices you pay in shops don’t stand still — think how much more a pint of milk costs now compared to 20 years ago — so you have the option for your Income Protection benefit to rise in line with inflation so you’re never caught short by rising prices. This will mean your premium rises as well, but to compensate so will your benefit each year along with inflation.

Example of the Cost of Income Protection

In the table below, we’ve laid out how much Income Protection costs for manual workers (using a plumber as an example) and for an office worker (using an accountant) of three different ages.

To calculate these Income Protection quotes we’ve made a number of assumptions, including:

• The individual is applying for an £1,500 a month benefit
• The individual wants guaranteed premiums that will never increase (unless they’ve opted to index-link the policy)
• They want cover up to the age of 65 that will pay out long-term, rather than for just 1, 2 or 5 years
• They have a 4 week deferred period
• They’re a non-smoker
• Cover is on an ‘own occupation’ basis, so they’ll get a payout if they’re medically unable to do their own specific job.

The figures in the table above represent the ‘gold standard’ of Income Protection, a fully comprehensive Accident & Sickness policy covering right up until your retirement.

As you will see below there are a number of ways you can lower the cost of premiums and achieve cheaper Income Protection without much compromise on coverage.

You are best working with an expert adviser to do this as some options have a larger impact on the premium than others. If you would like to discuss further please don’t hesitate to pop us a call on 02084327333 or email help@drewberry.co.uk.

How Do I Get Cheaper Income Protection?

There are multiple ways to reduce the price of cover and get low-cost Income Protection premiums. If you can’t afford a fully comprehensive cover, you can adjust the policy in four ways to achieve cheaper premiums.

These four steps to low-cost Accident & Sickness Insurance are laid out briefly below:

• Only cover the essentials
• Extend your deferral period
• Reduce the length of cover
• Opt for a limited pay-out period

1. Only Cover the Essentials

People often look to cover the maximum they’re entitled to cover based on their salary, which can increase the cost of Income Protection unnecessarily. This is as they try to closely mimic the net pay they receive in their pocket each month.

However, it’s important to realise that Income Protection is for a worst case scenario and therefore it makes sense just to cover the essential payments that would need to be made each month, such as mortgage payments, food costs, utility bills and council tax.

Other less vital outgoings could potentially be reduced or suspended, plus you won’t have commuting costs if you can’t work due to illness or injury.

So an individual looking for £1,500 of cover, as in the table above, could potentially try looking at £1,250 of cover instead for a lower-cost Income Protection without sacrificing much in the way of monetary benefit each month.

2. Increase the Deferral Period

It is also very common for people to automatically select a deferred period of 4 weeks, so their policy will start to pay out after a month off work.

This is usually the default on most policies, so clients tend to select it without considering any other deferral periods that may work better for their needs while achieving cheaper Income Protection premiums.

A longer deferral period can make a significant difference to the price of premiums. Consider whether you get sick pay from work or have any savings you could live off if you fell ill.

If you could extend your deferral period to 13 weeks, you enter a real ‘sweet spot’ and can see a significant reduction in the cost of Income Protection — potentially a reduction of more than 40%!

3. Reduce the Policy Cease Age

Realistically, when do you think you’ll be able to retire?

It’s true that the State Pension Age has increased — many younger clients will now be 68 before they can get their state pension — but will you be able to retire before this based on other provisions you’ve made, such as private pensions?

If you think you’ll be able to retire earlier, you can make Income Protection cheaper by lowering the policy cease age. This is because the risk of illness or injury increases notably after the age of 60, so reducing the cease age cuts a lot of that risk to the insurer.

Cutting your cease age, say to 60, can significantly lower the cost of Income Protection.

4. Opt for a 2 Year Payout

The options in the table above are for a policy that doesn’t limit how long the plan could pay out for (i.e. it could pay out right up until the age of 65 if the policyholder wasn’t well enough to return to work).

However, it is possible to choose an option with a maximum payout length of 1, 2 or 5 years.

Although multiple claims of 1, 2 or 5 years can usually be made for different medical conditions it does mean the insurer would cut off the benefit after 1, 2 or 5 years of claiming for the same condition.

For this reason the insurer can afford to lower your Income Protection premiums, but you are less well protected as a result if your illness extends for longer than say 2 years.

Low Cost Income Protection Example Premiums

To pull these Income Protection quotes we’ve made a number of assumptions, including:

• The individual is applying for an £1,250 a month benefit
• The individual wants guaranteed premiums that will never increase (unless they’ve opted to index-link the policy)
• They want cover up to the age of 60 that will pay out on a short-term basis, for 2 years
• They have a 13 week deferred period
• They’re a non-smoker
• Cover is on an ‘own occupation’ basis, so they’ll get a payout if they’re medically unable to do their own specific job.

Compare Top Budget Income Protection Insurers

Get Budget Income Protection Quotes & Expert Advice

With so many factors to consider when it comes to getting cheap Income Protection — and given most people want to achieve this without compromising on cover — it can be a bit of a minefield to start tinkering with a policy yourself.

This is especially the case when you consider the multitude of insurers on the market, each with their various pros and cons. Choosing the right one for your needs is essential, especially when it comes to your occupation, as certain insurers cater for those in manual roles while others look to

That’s where we come in. Drewberry has experts on hand to provide a full advice service so you can be sure you’re not only getting the best deal but also the most comprehensive cover at the same time.

Why Speak to Us…

We started Drewberry because we were tired of being treated like a number and not getting the service we all deserve when it comes to things as important as protecting our health and our finances. Below are just a few reasons why it makes sense to let us help.

• There is no fee for our service
• We are independent and impartial
  Drewberry isn’t tied to any insurance company, so we can provide completely impartial advice to make sure you get the most appropriate policy based solely on your needs.
• We’ve got bargaining power on our side
  This allows us to negotiate better premiums for you than you going direct yourself.
• You’ll speak to a dedicated expert from start to finish
  You will speak to a named expert with a direct telephone and email. No more automated machines and no more being sent from pillar to post – you’ll have someone to speak to who knows you.
• Benefit from our 5-star service
  We pride ourselves on providing a 5-star service, as can be seen from our 3768 and growing independent client reviews rating us at 4.92 / 5.
• Gain the protection of regulated advice
  You are protected. Where we provide a regulated advice service we are responsible for the policy we set-up for you. Doing it yourself or going direct to an insurer won’t provide this protection, so you won’t benefit from these securities.
• Claims support when you need it the most
  You have support should you need to make a claim. The most important thing when it comes to insurance is that claims are paid and quickly. We are here to support you during the claims process and make sure it’s as smooth and stress free as possible.