How to get the right income protection insurance

Find the right income protection insurance policy while cutting the cost of your premium with our money-saving tips.

Kim Jones
Kim Jones
Updated 23 August 2022  | 5 mins read

How much does income protection insurance cost?

Income protection insurance provides you with financial support if you find yourself unable to work due to an accident or illness, or if you’ve been made redundant.

The cost of your policy will depend on several things including your age, general health, whether you’re a smoker, the percentage of your income that you choose to be insured for (the lower the percentage, the cheaper the premium) and the length of cover.

Key points

  • An income protection policy can pay you a salary if you’re unable to work due to accident, illness or redundancy
  • Policies typically cover you for between 50-70% of your gross annual salary. You decide the level based on how much you think you’d need to manage financially
  • Short-term policies that pay out for periods of around 12 months are cheaper than long-term policies which will pay out until you return to work or reach retirement
  • Opting for a longer deferral period will mean a lower premium

How can I get cheaper income protection insurance?

Here are a couple of tips to help knock down the price of your income protection insurance:

Shop around

Do your research and consider the type and level of protection best suited to your circumstances before committing.

You can easily compare multiple policies and providers to get tailored quotes with our quick and easy comparison tool. You can then choose the best and most cost-effective policy for your needs.

Don't overinsure

Income protection policies typically allow you to specify the level of cover you require as a percentage of your existing gross annual salary. They’ll usually have an upper limit on the amount you can be insured for - often between 50-70% of your income.

The level you choose will depend on how much money you’d need to cover your monthly outgoings, like your mortgage, utility bills, everyday living expenses and any other regular payments.

Once you’ve factored in any savings you have and if you’d be eligible for a redundancy payout or government benefits should you be unable to work, then you’ll have a good idea of the percentage of your salary you want to cover.

The lower the percentage you choose, the cheaper your policy will be. So, it’s sensible to refrain from overestimating the payout you’ll need.

Cover the right occupation

You may be asked by the insurer what class of occupation you’d like to cover - ‘own occupation’, ‘suited occupation’ or ‘any occupation’.

The best and most comprehensive form of cover is for ‘own occupation’ as it means you can claim if you’re unable to do your specific job, and you won’t be expected to take on a different role.

With the other types of policies, the insurer may expect you to return to work but in a different role which you’re medically capable of carrying out. Premiums for these types of policies may cost less, but they provide a lower level of cover.

Short-term policies will be cheaper

You can choose between short-term or long-term income protection insurance policies.

Short-term policies pay out for a limited amount of time – normally between 12 months or two years (it will differ between insurers). This makes them cheaper than long-term policies which will pay out an income for a longer period of time, this could be until you’re well enough to return to work or even until retirement.

Pick a longer deferral period

The deferral period of your policy is the time you have to wait between when you first become unable to work and receiving an income from the policy.

You can choose a deferral period of anything from four to 52 weeks. The longer your deferral period, the more expensive your premiums are likely to be and vice versa.

When choosing your deferral period, it’s a good idea to find out your employer’s workplace policy and how long you’d be paid for if you fell ill or were injured and couldn’t work.

If they’d pay your salary in full for, say, three months, then you could opt for a three-month deferral period to keep premium costs a little lower.

Adopt a healthier lifestyle

Providers will typically charge lower premiums to younger, healthier people as they’re seen as less of a risk.

When you take out income protection insurance, you’ll be asked your age and whether you smoke. Being older and a smoker will increase your premiums. You’ll also be asked for your weight and height. If your BMI is high, you could be charged more, too.

Consider switching income protection provider

Depending on when you bought your policy, there may be better products on the market now, or your provider may offer enhanced benefits on new packages, so you may be missing out on a great deal.

For example, many providers now include things like ‘fracture cover’, which pays out a lump sum if you suffer a specified bone fracture, and enhanced support to help you get back to work.

It’s worth talking to your own provider to see if your policy can be adapted to include any enhanced cover they’re offering on new packages.

Also, consider consulting a financial adviser before switching. Applying for a new policy when you’re a lot older than when you took out your initial cover can make it more expensive.

Regularly review your policy

Financial and personal circumstances can change with time, so it’s wise to keep tabs on your policy and review it annually to check that you still have enough cover. This is especially the case if you change jobs, move home and increase your mortgage or start a family.

If your income tends to fluctuate, for instance if you’re self-employed, you may want to check how this affects your potential payouts. You might need to adjust your insurance so you don’t end up paying for cover you can’t claim.

Consider self-insuring

Putting away money and building up your savings can help provide a cushion if you were unable to work. You’d need a significant sum to match the sort of payouts that a long-term income protection policy pays out though. Do the maths and figure out if it’s doable.

Can I get joint income protection?

Income protection can only be taken out as an individual policy and not on a joint basis.

That’s because each policy is underwritten on a personal basis, taking into account things like occupation, income, age and health.

Both you and your partner can take out separate policies, though.

Get the right cover for your circumstances

Choosing the right level of cover will depend on a few different things including what financial commitments you have, whether you have rent or a mortgage to pay and if you’re paying off any other debts. As well as whether you have savings and a family who rely on your income.

Depending on your particular circumstances, a cheaper short-term income protection policy might suit you better as opposed to more expensive long-term income protection options.

Do I need unemployment cover?

This pays out if you lose your job through no fault of your own or are made redundant.

It doesn’t cover voluntary redundancy or if you get sacked from your position or decide to leave your job.

You can buy unemployment cover on its own or it can come as part of a comprehensive accident, sickness and unemployment policy.

Before you decide if you want to take out unemployment cover, you should consider your circumstances, job security and the redundancy packages offered by your particular employer.

Take care with premium types

The premium type you choose can have a big effect on the cost of your policy. Some premiums rise over time, so you should feel confident that you’d be able to afford the policy over its entire term.

Typically, there are three types to choose from:

Guaranteed premiums

A guaranteed premium means the amount you pay monthly remains fixed for the duration of the policy. The insurer ‘guarantees’ not to change your premium amount (unless you make a change to your policy, such as increasing your cover). This means you can budget easily for payments knowing they won’t change unexpectedly.

Reviewable premiums

Your premiums aren’t guaranteed to remain the same for the term of your policy. The insurer regularly reviews it and, depending on certain factors, can increase your monthly payments.

Usually, your premium won’t change within the first few years of the policy starting, but it could change annually after that. You have no control over how much you pay and can’t know for sure the total cost of the policy over its full term.

In some cases, you can choose to continue to pay the previous amount instead. But if you do this, the insurer will reduce the amount of cover to an amount your existing premium would pay for.

Age-related premiums

An age-related premium may start out cheaper than a guaranteed or reviewable premium, but monthly costs can rise significantly with age. Some age-related premiums increase at a rate guaranteed in advance (so you at least know ahead of time if the premiums will be affordable in the future). These might be called age-related guaranteed premiums.

Other age-related premiums increase at rates which can change. They’re often called age-related reviewable premiums.

Should I choose level cover or an inflation-linked policy?

Picking the right cover type can have an impact on how much you pay. Choose between:

Level cover

This means your amount of cover is fixed from the start and won’t change or keep up with inflation. So, in effect, your policy will be worth less in the future. This type of policy could work if you expect your essential outgoings that require cover will be less in a few years. For example, when dependent children leave home or you have paid off your mortgage.

Inflation-linked cover

This type of cover protects your policy against inflation. The amount you’re covered for will increase in line with inflation. Of course, this means that your premiums will increase, too.

Do I need a waiver of premium?

You can choose to insure your premiums by adding on a waiver of premium policy.

This will cover the cost of your premiums and ensure your policy doesn’t lapse if you fall ill or have an accident and are unable to work and pay your premiums during your deferral or waiting period.

Should I take out multiple income protection policies?

You can take out more than one income protection policy. But don’t make the mistake of doing this to try to cover 100% of your salary.

In the event of a claim, insurers will ask you about any other income protection or accident, sickness and unemployment plans you may have. If you have other policies, they’ll then restrict the claim value to an amount which (together with income from your other policies) does not exceed their maximum percentage of your gross salary.

So, for example, if you took out two policies both covering 50% of your salary, and both insurers have a maximum limit of 50%, then you’d still only receive 50% of your salary (and not 100%). So, the premiums you’ve paid on one of your policies will have been totally wasted.

The issue, of course, is that insurers need to be sure you’re not left with the same income as you’d have if you were in work or there’s little incentive to go back.