Income Protection Calculator

Our Income Protection Calculator aims to answer the two biggest questions people have about Income Protection Insurance:

• How much does Income Protection cost?
• How much Income Protection cover do I need?

What is Income Protection?

Income Protection Insurance is a policy that pays out a proportion of your wages if you’re unable to work due to accident or sickness. For this reason, it’s also known as Accident & Sickness Cover.

The benefit you receive from a personal Income Protection plan is entirely tax-free and can be used to maintain your living standards while you’re off work with an illness or injury.

Once the cover is live, if you fall ill or have an accident then your insurer begins paying out after an initial waiting period known as the deferred period.

Given the minimal level of Statutory Sick Pay and other government benefits available, many find they couldn’t live on state help alone if they couldn’t work.

As a result, more and more people are turning to Income Protection to provide them with stability and a guarantee of an income should they be unable to do their job.

How Much Does Income Protection Cost?

The cost of Income Protection depends largely on the amount of income you want to cover and how quickly you would like the policy to pay out after becoming too ill to work.

With regards to how quickly you want the policy to pay out it is best to align your deferred period with any sick pay entitlement or savings you have. The longer you can extend the deferred period the more cost effective your Income Protection premiums.

To calculate the amount of cover you need, consider your outgoings. The big bills are the obvious ones, such as rent / mortgage, utilities and groceries. However, you can also cover income used for discretionary expenditure, such as eating out or gym memberships.

Most insurers will allow you to cover between 50% and 70% of your income; it’s important to consider not simply insuring the highest amount possible but to carefully calculate how much cover you need to meet your core outgoings. This will keep premiums affordable.

Calculating the Cost of Income Protection

To calculate the cost of an Income Protection Insurance you will need the following information:

• Your age
• Your health/medical history and smoker status
• Your occupation
• The amount of cover you’re wanting to apply for
• Your preferred deferred period
• Your preferred policy cease age
• Whether you want to index the benefit so it maintains pace with inflation.

The best time to consider getting Income Protection is when you’re young and healthy.

Policies are cheaper the younger we are as there’s a lower likelihood of us suffering an illness or injury. And if you take out cover while you’re healthy, there won’t be any exclusions on your policy or an increase in premiums due to your medical history.

Income Protection Premium Calculation

The cost of Income Protection can vary considerably depending on your age, health, occupation, smoker status, sum assured and all of the other factors discussed above.

In the table below, we’ve highlighted how much Income Protection would cost for a manual worker (a plumber) and an office worker (an accountant) of three different ages.

To calculate these Income Protection quotes we’ve had to make 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 an 8 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.

As you can see from the calculations, the cost of taking out Income Protection increases as you get older due to the increased risk of us falling ill.

The good news is that many insurers offer guaranteed premiums so you can lock in the price when you set-up your plan.

How Much Income Protection Do I Need?

The level of Income Protection cover you need will depend on your monthly expenditure, but you’ve also got to consider how much you can insure.

As a general rule of thumb, you can insure between 50% and 70% of your gross annual income depending on your chosen Income Protection insurer.

Our experts can help you go through your living expenses to identify how much cover you need. It’s easy to take into account the obvious bills:

• Mortgage / rent
• Council tax and utilities
• Groceries and other household costs.

On top of this, you may also want to consider other expenditure, such as:

• Cost of running a car
• Mobile phone bills
• Other insurances (e.g. home insurance)
• Discretionary expenditure such as a gym membership or eating out.

Once you’ve calculated your ‘core’ outgoings each month, the expenditure you simply can’t do without, you’ll usually arrive at how much Income Protection you need to calculate the cost.

It can be tempting to simply go for the maximum you can insure, but this will increase the cost and you may find you don’t need the entire benefit.

For example, if you’re not working costs such as commuting or leisure activities may no longer be applicable.

Victoria Slade
Independent Protection Expert at Drewberry

Compare UK’s Top Accident & Sickness Insurers

AIG

AIG is one of only a handful Income Protection providers to offer cover for individuals with type 2 diabetes. It is also willing to offer diabetics guaranteed premiums and will not exclude diabetes in its policy, unlike other providers.

• Maximum coverage: 60% of the first £30,000 of your salary / 55% of salary between £30,000-£100,000 / 45% of any salary £100,000+
• Deferred periods: 4 / 8 / 13 / 26 / 52 weeks
• Maximum entry age: 54

Aviva

Aviva covers all policyholders with an own occupation definition of incapacity and, if you choose to return to work in a different occupation until you are well enough to return to your pre-incapacity occupation, Aviva will top up your reduced income with Back to Work Benefits.

• Maximum coverage: 55% of your pre-tax salary, up to a maximum of £240,000 per year.
• Deferred periods: 4-104 weeks (104 weeks is the longest available deferred period for UK Accident & Sickness policies)
• Maximum entry age: 59

British Friendly

British Friendly gives access to its Mutual Benefits program, which provides rewards such as vouchers for high street shops, discounted fitness tracking devices, emotional support services and online legal services. It’s one of the few insurers that will cover pilots on an own occupation basis.

• Maximum coverage: 70% of your pre-tax salary, up to a maximum of £45,000 per year.
• Deferred periods: Day 1 / 1 / 4 / 8 / 13 / 26 / 52 weeks
• Maximum entry age: 64

Cirencester Friendly

Cirencester Friendly provides you with a range of additional benefits and services, including a hospitalisation benefit and a Friendly Voice service that provides you with a personal nurse that you can contact for advice and emotional support.

• Maximum coverage: 65% of your pre-tax salary, up to a maximum of £65,000 per year.
• Deferred periods: Day 1 or 4 / 8/ 13 / 26 / 52 weeks
• Maximum entry age: 54

The Exeter

The Exeter is one of the few UK insurers that is able to offer own occupation cover to workers in higher risk occupations, although such policies only offer age banded premiums.

• Maximum coverage: 60% of your gross salary up to the first £100,000 and 40% of any additional income.
• Deferred periods: Day 1 / 1 week / 4 weeks / 8 weeks / 13 weeks / 26 weeks / 52 weeks
• Maximum entry age: 59

Legal & General

Legal and General comes with a free life cover element that pays out a maximum of 12 times your monthly benefit if you pass away while the policy is in force.

• Maximum coverage: 60% of your annual income before tax, up to a maximum of £200,000 per year.
• Deferred periods: 4 /13 / 26 / 52 weeks
• Maximum entry age: 60

Liverpool Victoria

Liverpool Victoria offers free access to unique LV Doctor Services, which include fast access to remote GP services, second opinion services and private prescriptions for policyholders and their children up to the age of 16.

• Maximum coverage: 60% of your annual income before tax, up to a maximum benefit of £12,500 per month
• Deferred periods: 1 month / 2 months / 3 months / 6 months / 12 months
• Maximum entry age: 59

Royal London

Royal London can include Fracture Cover, which pays out a lump sum of between £1,500 and £4,000 on top of any benefit you’d receive for being off work if you sustain a fracture of a specified body part

• Maximum coverage: 65% of the first £15,000 income and 55% of the remainder, up to a maximum of £250,000 per year
• Deferred periods: 4 / 8 / 13 / 26 / 52 weeks
• Maximum entry age: 59

Shepherds Friendly

Shepherds Friendly allows you to apply to suspend cover and premium payments under your plan for a minimum continuous period of 3 months and up to a maximum continuous period of 24 months. This is known as ‘Career Break’ option.

• Maximum coverage: 70% of income up to £49,000 per year
• Deferred periods: Day 1 / 1 week / 4 weeks / 8 weeks / 13 weeks / 26 weeks / 52 weeks
• Maximum entry age: 60

Vitality

Vitality provides a unique offering. While the core of its policy is similar to other providers’ offering, it also offers a unique set of additional benefits to those who participate in the Wellness / Optimiser programs that can include policy discounts and rewards.

• Maximum coverage: 60% of your earnings capped up to £2,500 per month and 50% of any earnings above, up to a maximum of £16,666 per month
• Deferred periods: 1 week / 1 / 3 / 6 / 12 months
• Maximum entry age: 59

Get Expert Advice Calculating the Cost of Your Income Protection

At Drewberry, we feel that Income Protection is one of the most important insurance products on the market. We all think to insure our homes and cars, but what about our income? After all, that’s what pays for everything at the end of the day.

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 2419 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.

Given Income Protection can be a bit of a minefield we have a whole team of expert advisers on hand to help answer any questions.

If you need any help please don’t hesitate to pop us a call on 02084327333 or email help@drewberry.co.uk.

Tom Conner
Director