Answered by Tom Conner
The importance of ensuring that you can afford Income Protection in the long run
This is a very important question and one that is often overlooked by people seeking cover. It is vital that the policy is affordable not only today but in the long-run also, especially as the risk of illness or injury rises with age.
When looking for a traditional (long-term) income protection plan covering your earnings against the risk of accident or sickness there are a number of options as to how the premiums can be structured (all payment protection policies have reviewable premiums), which are as follows:
With this option the premiums are fixed over the life of the policy, thus ensuring the insurer doesn’t have the right to alter how much you pay. This option usually has higher initial premiums but often works out the lowest cost option over the life of the policy.
With this premium structure the insurer is free to make alterations to the premiums over time. Although the premiums are initially lower there is the risk that the monthly cost may become too high at older ages.
Age Banded Premiums
Many of the Friendly Societies use this premium structure where the monthly cost rises significantly with age, sometimes by over five times. Many people take out these plans thinking they are getting the ‘best deal’, only to find out the policy becomes very expensive and often unaffordable down the road.
Which option should I choose?
Where possible we usually recommend guaranteed premiums so the policy is affordable long-term and the insurer doesn’t have the right to make changes. However, for very manual workers it may be necessary to have age bounded premiums to gain own occupation cover.
Over the life of the policy it is sometimes the case for white-collar workers that the total cost of age-bounded premiums can work out lower. Drewberry uses a calculator to establish the total cost of each option when recommending the most suitable choice to our clients.
Frequently Asked Income Protection Insurance Questions
They were patient thorrgh and good value for money. I regret not using them before and I will use them again in the future.
Very excellent service and informative. All options were offered and I had to make my own decision at the end. Would recommend.
Very efficient and well instructed service with polite staff, I felt Drewberry really did do their utmost to find the best deal for me personally.