Should I Take Guaranteed Or Reviewable Premium Income Protection?

Reviewable Or Guaranteed Premiums? Watch Our FAQ Video

When buying Income Protection for yourself, you’ll choose between reviewable and guaranteed premiums. Independent Protection Expert, Ben Brooks, explains what these mean and which type to choose. Just press play! 👇

The Difference Between Reviewable And Guaranteed premiums

When taking out an Income Protection policy you have two options for premiums. You can take out either Reviewable or Guaranteed. It’s important to understand the difference between the two as your premiums will vary depending on which you choose.

• Guaranteed Premiums
  With guaranteed premiums the monthly premiums you pay would remain fixed over the entire life of the policy. For example, if the monthly 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 rising age and 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 this type of premium at their discretion.

So, although the premiums might be affordable to begin with, in the future they may not be. Some insurers specifically increase premiums with age and therefore 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, 20 or 30 years, they can actually work out cheaper. You know that regardless of the insurer or external factors you will always pay the same. This is especially the case for younger workers who can gain very low fixed premiums.

Which type of premium is best for you will depend on your specific situation. Before taking out a policy it is usually best to speak to an adviser.

What About Indexation?

Some policies will also give you the option to link your monthly benefit to changes in inflation. This helps to ensure that the value of your benefit amount 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 that your benefit is rising with inflation each year.

Need Expert Help?

When looking to take out Income Protection we’d always advise speaking with an expert. This is to ensure you get the best cover for your specific needs and budget.

At Drewberry, we know all the insurers products inside out. We have access to the whole of market and offer a fee free service for our advice. We are on hand to help, so if you do want to chat just give us a call on 02084327333 or alternatively you can email us on help@drewberry.co.uk.