Should I Take Guaranteed Or Reviewable Income Protection Premiums?

When setting up your Income Protection policy, you have two premium types to choose from. These are guaranteed or reviewable premiums. It’s important to understand the difference between the two, as the cost of your policy will depend on your decision.

• Guaranteed premiums
  With guaranteed premiums, the monthly premiums you pay remains fixed over the entire life of the policy. For example, if the premium was £30 at the start of the plan, it would also be £30 at the end of the plan. In other words, the insurer ‘guarantees’ not to change the premiums unless you change the policy in some way
• Reviewable premiums
  With reviewable premiums, the insurer has the right to change the monthly premiums over time. These changes may be due to your increasing age or the insurer’s attitude towards risk based on average claims and wider economic factors. This means that the monthly premiums you pay could rise significantly over time.

Reviewable Or Guaranteed, Which Is Best?

Although reviewable premiums tend to be cheaper initially, overtime they can become more and more expensive. As mentioned above, this is because insurers can increase the cost of premiums at their discretion.

So, although the premiums might be affordable to begin with, in the future they may not be. Some insurers increase premiums with age, so they offer very low premiums at the start of a policy. Then over time they increase significantly, sometimes by over three times the initial premium.

Guaranteed premiums however, although more expensive to begin with, remain fixed. Particularly with long terms policies over they can actually work out cheaper. You know that regardless of the insurer or external factors you will always pay the same amount each month. This is especially the case for younger workers who secure low fixed premiums.

Which type of premium is “best” for you will depend on your specific situation. Before taking out a policy, it’s a good idea to speak to an adviser. We can help you identify which premium type is most suitable – give us a call on 02084327333 or email help@drewberry.co.uk for fee-free advice.

What About Indexation?

Some policies will also give you the option of index linking your policy to ensure your benefit remains in line with inflation. This helps to ensure that the value of your benefit doesn’t reduce over time.

It’s important to note however, with this option your premiums will also increase each year, even if you have guaranteed premiums. This is to compensate for the fact your benefit is rising with inflation year on year.

Need Specialist Help?

When looking to get Income Protection, we’d always advise speaking with a specialist. This is to ensure you get the most suitable cover for your specific needs and budget. Our advisers live and breathe the personal insurance market, so we’re in a great position to recommend the right policy for your needs. Give us a call on 02084327333 or email us on help@drewberry.co.uk for fee-free advice

Why Speak to Us?

When it comes to protecting yourself and your finances, you deserve first-class service. Here’s why you should talk to us:

• There’s no fee for our service
• We’re an award-winning independent insurance broker, working with the leading UK insurers
• You’ll speak to a dedicated specialist from start to finish
• 4122 and growing independent client reviews rating us at 4.92 / 5
• Claims support when you need it most
• We’re authorised and regulated by the Financial Conduct Authority. Find us on the financial services register.