How Much Does Income Protection Cost?

Income Protection Cost

Like other insurance policies, your Income Protection Insurance payments will be dependent on many different factors, and in this article, I’ll will be taking a look at what they are and how much does Income Protection Cost. I recommend reading my article ‘What is Income Protection?’, not just because it’s brilliant, but because it will explain in detail what income protection insurance is, and why you should have it. 


So, back to question in hand; “How much of my wages is it going to cost to protect my wages?”

Well, that will depend on:

The Amount of Money Per Month You’re Insured For

How much you’re going to get if you are suddenly unable to work due to illness or injury is normally the first thing people want to know, and the amount you’ll want to insure for will depend on your monthly outgoings, including:

  • Mortgage or rent
  • Utility bills and council tax
  • Weekly food shop
  • Car costs (petrol, tax, insurance etc)
  • Other insurances

Obviously, this isn’t a long list, and you’ll notice we’ve only added some of your ‘main’ outgoings. We haven’t included what you spend on takeaways, nights out etc. If you’re no longer working those might now be considered luxuries you’ll have to do without for a while, especially if you are likely to return to work soon and can resume your normal lifestyle, Chinese takeaways and all. In short, the less per month you need, the less your insurance premiums will cost you. 

Once you’ve calculated the cost of the things you simply HAVE to pay, it will be easier to work out how much income protection you need to cover the cost. But what about the length of your policy?

The Length of Your Maximum Pay Out Period

How long you will get paid FOR will depend on which type of policy you have taken out. 

  • Short Term Income Protection – Pays you an income for between 12 and 24 months, probably best suited to those who don’t have children or a mortgage
  • Long Term Income Protection – Pays you an income until you can go back to work, however long that takes or you retire (whichever comes first). This option is better for those who have dependents or a mortgage. 

Obviously, a long-term policy is going to have higher monthly premiums, but if you are the main breadwinner within your family and being out of work long term would mean bills not being paid, children not being fed, and possibly losing the roof over your head, then it’s well-worth forking out for a long-term plan. 

So, how long will it take before you start receiving payments? Keep reading…

The Length of Time Before You Start Receiving Payments

On average the time between you stopping work and your monthly pay out starting could be anywhere between 4 weeks, and 12 months. Insurance companies call this period the ‘deferred period’

Your choice of ‘deferred period’ depends on personal circumstances such any other household income, whether you have savings, other insurances or sick pay through your employer.

Maybe you don’t need to claim straight away because:

  • Savings- You have been saving for a rainy day and can cover your outgoings for a while
  • Other Insurance- Maybe you have critical illness cover that has paid cash and is tiding you over for now. (For more information on critical illness cover, read our article that explains all. It’s fabulous)
  • Partner Or Family Support- You are fortunate enough that someone else could pay the bills on your behalf for a short while until you need to make your claim
  • Sick Pay – for example, your employer pays your wage for up to 3 months of you being sick, so you won’t need an income from your insurance company until month 4

The longer you wait for your payments to begin, the lower your monthly premiums will be. 

So, that’s the ‘how much’ and ‘how long’ out of the way, but what about personal factors that could affect your monthly premiums? 

Are you over 50? smoke 40 a day? and have recently taken up skydiving?…step this way….

Your Age

Common sense tells you that the likelihood of you getting an injury or illness increases with age, and so in theory the older you are, the higher your premiums will be. Here is some information about premiums to consider before you take out your policy:

  • Guaranteed Premiums – This means that the premiums are fixed over the life of the policy. Usually this does mean higher initial premiums but will work out the most cost-effective option over time.
  • Renewable Premiums – With this type of policy the insurer can change the premiums, usually they review your policy every 5 years. The initial premiums are usually lower, however the monthly cost might become too high as you get older. 
  • Age CostedPremiums – Your monthly premiums will rise every year with age, so although the premiums start off cheap and it looks like a great deal, the premiums could become unaffordable down the road. 

Your Health

Another no-brainer. Since an income protection policy pays out in the event of not being able to work, it’s obvious that any pre-existing conditions are going to affect the cost of your premiums, or that the condition in question will not be covered by your insurer! You are unlikely to be refused cover – but it IS likely that exclusions will be put in place to remove said condition from your policy, and it might increase your premiums. However…..

Some exclusions made on a policy could be removed by your provider after a period has passed since you last had symptoms or had treatment. This could result in your monthly premiums going down.

Your Lifestyle

Enjoy the odd pizza or 2 on a Friday night? Do your friends call you Fag-Ash Lil? Chances are that these lifestyle choices (we’re talking about smoking, not having terrible taste in friends) will greatly increase your monthly premiums. 

And you don’t need a doctor to tell you that heightened health risks caused by obesity, heavy drinking, or drug taking are going to make it more likely that you end up too sick to work.

Your Families Medical History

As with pre-existing medical conditions, any conditions your parents or siblings might have suffered from will be considered when you take out your policy. Every insurer is different, but you can certainly expect to pay higher premiums if the likelihood is high that you will suffer from a condition that means you will no longer be able to work. 

Income Protection Insurance will generally follow the same format as a Critical Illness policy when it comes to which conditions will exclude cover or lead to a monthly price increase.

Examples are:

  • Heart Attacks
  • Diabetes
  • Some types of cancer
  • Stroke

Hazardous Jobs

Working in a job that is statistically risky is likely to fuel your desire for something like Income Protection, but by that token your occupation is likely to push the cost of your monthly premiums up, or affect your ability to get certain types of cover from some insurers. Some examples of jobs considered hazardous are:

  • Construction Workers – Includes working with hazardous substances, risk of falling objects, working at heights, and working with machinery. 
  • Tradesman – all the general trades carry an element of risk including; carpenter, plumber, electrician, mechanic. All these trades and more involve heavy or dangerous machinery or substances.
  • Agricultural Work – all that hard-physical labour, heavy machinery, and power tools? Plus, live animals! – do you know what a cow weighs?? No, neither do I, but it’s A LOT, certainly wouldn’t one falling on you would you?! 

Below I have created a table which will give you some example costs:

Non-smoker, no medical conditions, low risk job and no family history*

£1,000 per month* 1 month deferred To age 65 Full payout 3 month deferred To age 65 Full payout 1 month deferred To age 65 Short payout (2y) 3 month deferred To age 65 Short payout (2y)
30 years old £26.27 per month £16.63 per month £13.66 per month £6.97 per month
40 years old £43.23 per month £25.63 per month £20.12 per month £11.07 per month
50 years old £67.37 per month £40.52 per month £30.84 per month £19.14 per month

If you are reading this and you know you have some medical conditions or a job  which will affect your premiums, please request a call back from either me or someone from my team and we can give you some more information and a free quote. 

I’ve done my best to talk through How Much Does Income Protection Cost however feel free to click below to speak to myself directly.

Still have unanswered questions?

Until everyone is back on their feet, as a company if you would like a quote, we would like to do our part to help by paying for the cost of your first month’s premium. You can get a quote either by connecting us through one of the options in the link above or calling us on 01233 55 54 54.

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Sam

Sam

I’m More Than Money’s Income Protection and Business Protection Insurance expert, I started my career in finance 8 years ago. I’ve gone from advising on insurance in my home county of Kent, to working in the big city of London. I started More Than Money with my Dad and Brother, to get away from the 'sales environment'. When you're a qualified Adviser, the quality of your advice has to come first, not a 'sale on the board'. I thought, if I cant find that environment elsewhere, well i'll create it myself.

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