When considering Income Protection Insurance, it makes sense to look for the best possible policy your money can buy. But this can be hard to pinpoint since the best policy for you depends on your unique circumstances and requirements.
This expert guide covers all the variables you’ll need to think about when comparing Income Protection providers and aims to help you find the right policy for your needs.
Income Protection Insurance is a policy designed to pay out a percentage of your monthly income if any medical issue prevents you from working. It can protect your income for the rest of your working life, so even if you never worked again due to poor health, you’ll get a sum paid to you each month.
It enables you to keep paying for all your essential outgoings, so you can rest assured that your mortgage repayments or rent, household bills, and groceries are covered.
Depending on several factors (which we’ll go over shortly), you can typically cover up to 70% of your gross annual salary.
There are several factors to think about when looking for the Best Income Protection policy for you, including:
Every insurer you come across has its own terms and conditions, underwriting options, and preferred type of client. For example, let’s say you work in a risky occupation within the construction sector or you’re a regular smoker. These aspects may affect which Income Protection provider is best suited to you.
If you’ve already done some research, you can get an idea of how much a policy will cost through our online Income Protection quote tool.
EXPERT TIP 🤓
According to consumer group Which?, Income Protection is the one policy every working adult should consider.
It’s pretty much impossible for us to suggest an Income Protection provider without first knowing what you need from a policy. Every client who comes to us has different requirements, making your Income Protection policy unique to you and your circumstances.
If you’re seeking an insurance policy that protects your income against the risk of illness or injury, then the Best Income Protection policies often include:
An Own Occupation definition of incapacity means that your policy will payout if you’re unable to carry out your specific job due to any illness or injury.
It’s worth noting here that if you were to buy a Payment Protection Plan, these mostly use the ‘suited occupation’ definition, making it hard for you to claim if you were unable to work in your current role.
An Income Protection policy with guaranteed premiums is a great option, as it means your agreed upon premiums at the start of your policy will not change. We recommend this type of premium when setting up your policy.
Let’s say, your policy costs you £30 a month, this will stay this price for the length of your policy. This is particularly useful as it means your cover will never cost more or be at risk of being unaffordable for you.
While you can buy Short-Term Income Protection, these policies often have a maximum claim length of 2 years. Yes, it’s budget friendly, but if you suffered an accident or developed an illness requiring more than 2 years out of work, your policy won’t stretch that far.
But a long-term policy will continue to pay you a monthly income right up until the end of the policy term if you’re unable to work. Here, your policy can protect you right up until you reach retirement age.
We recommend Long-Term Income Protection if you can afford the premiums over time. Given that UK insurer Liverpool Victoria’s average payout length in 2022 was close to 7 years, it makes sense to buy a policy that won’t limit how long you could claim for.
Many of the top UK Income Protection providers, such as Aviva, Liverpool Victoria, and The Exeter, offer long-term policies.
If you’re on a tight budget, short-term cover is better than no cover at all.
But the best Income Protection in terms of comprehensive cover are those that protect you for your entire working life right up until retirement.
Samantha Haffenden-Angear
Independent Protection Expert
Most Income Protection providers in the UK cover between 50-70% of an individual’s income. Each insurer is different and one may offer a higher percentage of cover than another. For example, Zurich will cover up to 80%, while Liverpool Victoria will cover up to 60%.
What’s best for you here is the Income Protection policy that covers a satisfactory amount of your monthly income to ensure you can pay for living costs while out of work.
You’ll choose a deferred period for your Income Protection Insurance. This is the period in which you could survive on savings or additional means of income before you’d need your policy benefit to start paying out.
Insurers typically offer deferred periods of 4, 8, 13, 26, or 52 weeks. The longer this is, the lower your premiums. However, as this is the amount of time you’ll need to wait before your benefit begins, it must be an affordable decision.
If you could live off your savings for 4 weeks before you need financial support, a 4 week deferred period is your best option. There’s no point in a 26 weeks (6 month) deferred period if you’d be financially struggling before the period ends.
EXPERT TIP 🤓
The best deferred period for you is the one that’s most affordable to you.
The best Income Protection policy for you is dependent on your needs and personal circumstances. To identify whether a policy is right for you, it’s vital to read through the terms and conditions. Most of us are guilty of skipping the T&Cs, but with an insurance policy it’s vital you do read through these.
The terms and conditions detail what is and what isn’t covered, and much more. Failing to read the policy documents could come back to bite you when you need to make a claim.
The best Income Protection cover often does not have any standard exclusions. Your insurer will payout for any medical condition that prevents you from working, irrespective of its cause.
Some providers do have exclusions, such as:
It’s also important to note that if you travel overseas for business, or think you may reside outside of the UK at any point, some policies will have more restrictions.
If you need help to find the best Income Protection policy, please pop us a call on 02084327333 or email help@drewberry.co.uk.
Most insurers have an initial unemployment exclusion period where you can’t make a claim within the first 120 or 180 days of taking out the policy. Most plans only cover forced redundancy (i.e. you cannot take voluntary redundancy or get asked to leave due to poor performance).
It’s not unusual for people to choose an Income Protection Insurance provider based solely on the insurer’s payout rate. Some believe these statistics show which provider is the best overall. However, payout rates should be used as a guide. Many insurers publicly publish their payout rates every year, but these are to be used with a pinch of salt.
Payout statistics are never 100% accurate and you’ll find most providers publish very high rates. Many of which are over 90%. While this percentage can give you some confidence in the provider and the policy, it can be swayed if policyholders are untruthful on their application or try to claim for current/ongoing conditions.
Insurer | 2020 | 2021 | 2022 |
---|---|---|---|
Zurich | 85% | 99% | 85% |
Vitality | 96.8% | N/A | 96.5% |
Shepherds Friendly | N/A | 95% | 96.2% |
Cirencester Friendly | 94% | 93.6% | 95.4% |
Holloway Friendly | 98% | 94% | 93.4% |
British Friendly | 87% | 84% | 90% |
Liverpool Victoria | 95% | 93% | 92% |
The Exeter | 91% | 93% | 92% |
Aviva | 87.5% | 85.4% | 94.3% |
Legal & General | 93% | 81% | 82.2% |
The most significant responsibility an Income Protection insurer has is paying claims. Over recent years, improvements have been made, making it easier for policyholders to claim. Insurers are also trying to speed up their processes for approving these.
A number of insurers accept claims over the telephone, putting those lengthy forms to bed. When you need to make a claim, you expect it to be an easy process. When looking for the Best Income Protection provider, make sure to find out the insurer’s process first.
If you plan to submit a claim, it’s best to let your insurer know as soon as possible. The sooner you get the process started, the faster they can approve your claim and begin paying the benefit you need.
Neil is a client of Drewberry™ who bought Income Protection Insurance with British Friendly. He’d had his policy for just 4 years before falling ill.
After experiencing stomach pains, Neil went to his GP, who referred him for further tests. These tests discovered that he unfortunately had bowel cancer, and it was already at stage 2. Neil needed surgery to remove the cancer, but developed postoperative sepsis and had to spend several weeks in hospital recovering, completely unable to work.
British Friendly began paying him a proportion of his earnings after his deferral period, allowing him to keep up with all the important bills, such as his mortgage, when he was unwell. Take a look at Neil’s full story 👇
This is not an easy question to answer, as your Income Protection premiums are based on your personal circumstances and your policy needs. The price you pay is likely to be different to your neighbour, for instance.
When you compare quotes from different insurers, your premiums are determined by a range of factors, including:
Another aspect to consider is how providers differ from one another. You’ll find that they have different attitudes towards risk which will impact the amount they charge.
As there’s so many factors at play for an insurer to calculate policy premiums, there’s no right or wrong answer to which provider is the most competitive. This is especially true if you have any medical conditions to disclose in your application.
The good news is that even if you’re on a budget, there are ways to adjust your policy to reflect what you can afford.
The ‘best’ price for you is unique, so we always recommend speaking to a financial adviser who can help you to compare quotes.
Danny Gill
Independent Protection Expert
You can compare quotes yourself using our Income Protection comparison tool, but not all insurers provide online quotes. Here’s where a member of our team can help you. As independent financial experts, we’re able to get quotes from all leading UK Income Protection providers, and we can help you find the best policy for the best price. Just pop us a call on 02084327333 or email help@drewberry.co.uk.
Even though premiums vary from person to person, we’ve got some quotes to use as an example. You’ll be able to see how different factors influence the cost of Income Protection.
Every Income Protection provider will charge a different premium, due to the variety of services and benefits available. The insurer’s appetite for risk plays a part too.
To give you an example of how costs vary depending on your provider, we’ve got some quotes. These assume you:
Different Providers | ||
---|---|---|
£28.91 | £37.00 | £42.18 |
The older you are when you apply for a policy, the higher the cost of Income Protection. You’re at a higher risk of developing an illness or suffering an injury as you age, and the monthly premium reflects that.
Using the same factors as above, here are some example quotes for different ages.
Age 35 | Age 45 | Age 55 |
---|---|---|
£28.91 | £44.84 | £62.06 |
Although most Income Protection policies have no standard exclusions, it’s possible for an insurer to increase your premiums if you have a pre-existing medical condition. The insurer may even exclude it altogether.
Pre-existing conditions are normally excluded, as they require long-term treatment and medication. This would increase the costs for the insurer, so they either exclude it or hike premiums to cover the extra risk.
A nicotine habit puts you at a higher risk of developing a health condition, such as heart disease, cancer, or a stroke. If you smoke, insurers may charge you more for your Income Protection policy to cover the higher risk.
Not all providers charge more for smokers, though. Here is a general idea of how the monthly costs differ between a smoker and a non-smoker, based on the same policy options above.
Smoker 🚬 | Non-Smoker 🚭 |
---|---|
£43.80 | £34.51 |
You’ll select a deferred period when setting up your Income Protection policy. Insurers tend to offer periods of 4, 8, 13, 26, or 52 weeks. The longer your deferred period, the cheaper your premiums will be.
Below are some monthly cost examples of policies with different deferred periods. These are based on the previously used policy options above.
4 Weeks | 8 Weeks | 13 Weeks |
---|---|---|
£38.52 | £34.92 | £23.12 |
As independent insurance brokers, we work with all the top UK insurers to help you find the best cover for the right price.
To help make a more informed decision, the table below offers a great summary of each major provider and its Income Protection plans.
Maximum Benefit |
|
Claim Duration | Either:
|
Deferred Period | 4 / 8 / 13 / 26 / 52 weeks |
Premium Type | Guaranteed |
Claims Paid | n.a. | Additional Benefits |
Smart Health is AIG’s main additional benefits offering. It includes:
| The Drewberry Verdict |
👍
| Smart Health provides an excellent range of additional benefits, among the best in the market |
👍
| High monthly benefit available |
🏆
|
|
❌
| AIG does not publish claims data for Income Protection |
Maximum Benefit |
|
Claims Duration | Either:
|
Deferred Period | 4 / 8 / 13 / 26 / 52 / 104 weeks |
Premium Type | Guaranteed or reviewable |
Claims Paid | 94.3% in 2022 | Additional Benefits |
Aviva DigiCare+Free as standard, Aviva DigiCare+ is a health and wellbeing service offering:
You can also opt to pay an extra £36 annually for three Digital GP appointments per year. Other Free Benefits
Optional Paid Benefits
| The Drewberry Verdict |
👍
| Aviva DigiCare+ is a great suite of additional benefits available for free |
👍
| High monthly benefit available |
👍
| Further additional benefits available at cost, such as fracture cover for £4 a month |
👍
| Specialist cover available for doctors, surgeons and other NHS workers |
👍
| 104 week deferral period available, the longest in the market |
🏆
|
|
❌
| While Aviva offers a digital GP service, which not every insurer does, it’s at extra cost and even then capped at three appointments per year |
❌
| The percentage of successful claims paid is a little on the low side |
Maximum Benefit |
|
Claims Duration | Either:
|
Deferred Period |
|
Premium Type | Age-banded or guaranteed |
Claims Paid | 90% in 2022 | Additional Benefits |
Mutual Benefits
| The Drewberry Verdict |
👍
| Offers own occupation cover to riskier occupations that many other insurers won’t cover on this basis or charge more due to their job |
🏆
|
|
❌
| While British Friendly covers 65% of your earnings, the highest percentage available with personal Income Protection, it caps your benefit at £57,000 per year. If you earn more than this, another insurer might be better. |
Maximum Benefit |
|
Claims Duration |
|
Deferred Period | Day 1 or 1 / 4 / 8 / 13 / 26 / 52 weeks |
Premium Type | Guaranteed or age-banded |
Claims Paid | 95.4% in 2022 | Additional Benefits |
Optional Add-Ons for an Extra Premium
| The Drewberry Verdict |
👍
| Offers own occupation policies to those in some higher-risk occupations that other insurers don’t cover on this basis |
👍
| Good range of free additional benefits, including a remote GP service, something often only offered by larger insurers |
🏆
|
|
❌
| Annual benefit cap of £52,000. Higher earners needing more than this might be better with another insurer. |
❌
| Maximum entry age is 54, so you can’t take out a policy if you’re older than this. This is one of the lowest in the market. |
❌
| No cover if you work overseas for more than 8 weeks in a calendar year. This is more restrictive than many other insurers. |
Maximum Benefit |
|
Claims Duration | Either:
|
Deferred Period | 1 / 4 / 8 / 13 / 26 / 52 weeks |
Premium Type | Either:
|
Claims Paid | 93.4% in 2022 | Additional Benefits |
| The Drewberry Verdict |
👍
| While most insurers let you increase your benefit if you increase your mortgage, Holloway also lets you increase your benefit if your rent rises after moving to a new rental property / your landlord putting up your rent |
👍
| If you have hazardous hobbies, you can choose to exclude related illness / injury from your policy to avoid higher premiums. Most insurers don’t offer this and either charge more due to such hobbies or exclude them outright without charging less |
🏆
|
|
❌
| If you choose age-banded premiums, Holloway reserves the right to review them up or down after 5 years on top of raising them with age. With most other insurers, age-banded premiums only rise with age. |
Maximum Benefit |
|
Claims Duration | Either:
|
Deferred Period | 4 / 8 / 13 / 26 / 52 weeks |
Premium Type | Guaranteed |
Claims Paid | 82.2% in 2022 | Additional Benefits |
Nurse Support ServicesA telephone helpline staffed with qualified nurses to offer advice and support if you / an immediate family member develops a physical or mental health condition, disability, trauma or bereavement. It offers:
| The Drewberry Verdict |
👍
| High maximum benefit of £240,000 per year (£168,000 per year if you index your benefit). This is one of the highest available. |
👍
| Specialist cover for NHS medical professionals with features such as dual deferred periods to match NHS sick pay and a higher income guarantee |
🏆
|
|
❌
| Successful claims figures for 2022 are a little on the low side |
❌
| If you’ve been self-employed for 12 months or less when you apply, Legal & General caps your benefit at 35% of annual earnings rather than the maximum offered to others. Newly self-employed workers are therefore likely to find another provider better. |
❌
| Many insurers offer a death benefit worth a multiple of your monthly benefit. However, Legal & General’s death benefit is a multiple of your monthly premium, which will likely be much lower. |
Maximum Benefit |
|
Claims Duration | Either:
|
Deferred Period | 4 / 8 / 12 / 26 / 52 weeks |
Premium Type | Guaranteed or reviewable |
Claims Paid | 92% in 2022 | Additional Benefits |
| The Drewberry Verdict |
👍
| Good range of free additional benefits, including fracture cover as standard. This is rarely free with other Income Protection providers. |
👍
| Offers special features for NHS doctors and surgeons, such as an enhanced benefit guarantee and a split deferred period |
🏆
|
|
❌
| Shortest deferral period is 4 weeks. If you couldn’t wait 4 weeks for a payout, another insurer might be more suitable. |
Maximum Benefit |
|
Claims Duration | Either:
|
Deferred Period | 4 / 8 / 13 / 26 / 52 weeks |
Premium Type | Guaranteed or reviewable |
Claims Paid | N/A | Additional Benefits |
Helping HandFree with all Royal London Income Protection policies, this offers:
| The Drewberry Verdict |
👍
| Good range of free additional benefits, including fracture cover. This is rarely free with Income Protection. |
👍
| High maximum benefit of £20,000 per month / £250,000 per year in cash terms |
👍
| Special features for NHS medical professionals, including an enhanced benefit guarantee, NHS sick pay mirroring and sabbatical cover |
👍
| Self-employed workers can cover fixed payments you must make alongside your wages, for example for services such as insurance or for loans / other credit |
🏆
|
|
❌
| Cover limited to 65% of the first £15,000 of your earnings and 55% of the remainder. This is lower than many other insurers. If you more than 55% of your earnings above £15,000, another insurer might be more appropriate. |
❌
| Many insurers offer a death benefit worth a multiple of your monthly benefit. However, Royal London’s death benefit is a multiple of your monthly premium, which will likely be much lower. |
When setting up your Income Protection Insurance policy, you can go direct to an insurer or take out cover through an intermediary. It’s important to recognise the difference, as one provides you with a lot more protection than the other.
If you go direct to an insurer to set up your policy, it’s considered a non-advised sale. As you have made the decision to take out this policy, there’s no financial protection should the policy be inappropriate—the responsibility lies on your shoulders.
Utilising an adviser who provides an advised sale means they’re responsible for the policy they help set up. They need to understand your circumstances fully, including any existing health conditions, to make sure you take out the most suitable cover for your needs. If it turns out their advice was not appropriate, the responsibility sits with the adviser.
Here at Drewberry, we provide a fully advised service, so you benefit from expert advice and know you have that additional level of protection should something go wrong.
We’re proud of the service we provide, and our clients think so too, with 3627 independent reviews on Reviews.co.uk rating us at 4.92 / 5.
Although these products seem similar, they provide financial protection in different ways. Each has their cover options and purposes.
Income Protection Insurance covers anything that medically prevents you from doing your job and pays out a monthly income to cover your regular bills.
Providing you choose the ‘own occupation’ definition of incapacity, Income Protection pays out for accidents, illnesses and injuries that stop you from doing your specific job role. You won’t be asked to perform any other job role if you can’t do your own occupation.
Common illnesses claimed for under Income Protection policies include mental health issues, musculoskeletal problems (e.g. bad backs) and cancer.
Critical Illness Cover pays out a tax-free cash lump sum if you’re diagnosed with a critical illness (such as cancer, heart attack or stroke) of a specified severity to claim.
However, Critical Illness Cover is limited to the illnesses defined in the policy terms and conditions. Whereas Income Protection pays out for anything that medically prevents you from working.
The question of whether you need Income Protection depends on your circumstances. But here are some scenarios to consider if you fell ill without it:
If you’re not sure about the answers to these questions, Income Protection might be something to consider to protect your family and your finances in case you can’t work through accident or sickness.
The maximum Income Protection benefit is typically 70% of your income for a personal policy. Insurers tend to offer between 50%-70% of your gross (pre-tax) income as a benefit.
The reason you can’t insure 100% of your gross income is because, after taxes and National Insurance, you don’t receive 100% of your gross income from your employer or your self-employed activities each month/year.
Most insurers will have a maximum ceiling in terms of the amount they’re willing to cover you for on an annual basis. This could be as low as £45,000 or up to £250,000, so it’s important you choose the right insurer for your level of income.
Short-Term Income Protection will pay out for a maximum of 1, 2 or 5 years per injury or illness, per claim. However, the policy lasts until your set retirement age, so you can claim as many times as you need to with different illnesses or injuries for the maximum term.
If you suffer an illness or injury that takes you beyond the maximum claims period on Short-Term Income Protection, your payments will cease.
Long-Term Income Protection is a more comprehensive option, as you can claim as many times as you need to, for as long as you need to, right up until retirement age.
If you’re ever so ill you can never work again, you’ll be entitled to receive your Income Protection benefit right up until your chosen policy cease age.
Finding the best Income Protection can be a bit of a minefield, particularly given the confusion that can occur with Payment Protection and the importance of getting ‘Own Occupation’ cover.
Our expert advisers are here to ensure you have the information and the support you need when setting up the most appropriate Income Protection for your circumstances. Give us a call on 02084327333 or email help@drewberry.co.uk, we’re here to help.
We started Drewberry™ because we were tired of being treated like a number.
We all deserve a first class service when it comes to issues as important as protecting our health and our finances. Below are just a few reasons why it makes sense to talk to us.