Average cost of income protection

For many people, their job is their livelihood. The money it brings in month to month keeps life ticking along and that’s got to be worth protecting, right? However, spending a good chunk of your earnings to do so is unlikely to appeal to many people.

The good news is that income protection will not break the bank. However like most insurance products, the cost of income protection differs from person to person. We explain what factors come into play when you take out an income protection policy and how much you can expect to pay.

Firstly, what is income protection?

If you’re not totally sure what income protection is, it’s essentially insurance that protects your salary if you can’t go out to work anymore due to injury or illness. It replaces a percentage of your income (usually between 50-70%) until either you are declared fit to work again, your policy expires, you retire or you pass away. You can claim on an income protection policy as often as you need to until the policy comes to an end.

When you take out an income protection policy, you will need to decide on a deferral period. This is a pre-agreed period of time that you will need to wait between making your claim and receiving your payout. The deferral period will have an impact on how much you will pay each month in premiums. The longer the deferral period is, the cheaper the premiums. If your deferral period is three months, that’s three months when you’re going to need money to fall back on whilst you’re out of work, so it’s really important to factor this in. 

What else determines the cost of my income protection premiums?

Everyone has a different set of circumstances, so everyone’s income protection policy will be priced a little differently. Your monthly premiums will be calculated based on a number of factors including: your age, your marital status, whether you smoke or have previously smoked, your lifestyle (such as whether you have any high risk hobbies like extreme sports), your job, your health (current health, your weight and your family medical history), the deferral period you decide on and how much income you’d like to receive each month.

You need to think about exactly how much income you would like to receive each month. If you're unsure, our expert advisers can help. Also - when deciding how much cover you need, consider your day-to-day living costs, any debts that you’re currently paying off and your monthly mortgage/rent payments.

How much does an income protection policy actually cost?*

Although it differs from person to person, we can give you some ballpark figures to work with. Here’s a few examples:

• A 21 year old female non-smoker would generally be looking at a policy costing between £8-20 per month (depending on the term), based on a 3 month defer period, £750 to be paid tax free each month and covering up to the age of 68
• A 32 year old male non-smoker would generally be looking at a policy costing between £14-35 per month (depending on the term) with a one month defer period, £1000 to be paid tax free each month and covering up to the age of 68
• A 45 year old male non-smoker would generally be looking at a policy costing between £20-70 per month (depending on the term) with a 12 month defer period, £1,500 to be paid tax free each month and covering up to the age of 67
• A 56 year old female non-smoker would generally be looking at a policy costing between £30-75 per month (depending on the term) with a 6 month defer period, £1,200 to be paid tax free each month and covering her up to the age of 67

Generally speaking, the younger you are, the less you’ll pay each month for your income protection policy. That’s why it is always worth taking out an income protection policy earlier on in life - even though you might feel that injury and serious illness is highly unlikely. Getting your policy early on in life means you’ll have nailed a low price which will never go up. From there, you can add to your policy as and when you need to, such as increasing your payout amount when you get a mortgage so you can ensure your policy will cover that cost if you ever come to claim.

Although we’ve given you a general overview and explained what choices you might have to consider to meet your needs, when discussing cover options with your adviser they can make a recommendation based on your individual needs, and our protection advisers can help you with that.

For the protection and peace of mind that this vital insurance product offers, it will always be worth a little chunk of your paycheck. If you’re worried about how much it might cost you, speak to us. It’s our job to find the policy that works for you. Give us a call on 0800 316 7253 or fill out our online contact form.

*Prices based on LifeSearch research as at 21.7.2020 with a range of UK insurers, applicant finances, age and health criteria. For an up-to-date quote to suit your own personal needs, please speak to a LifeSearch adviser.