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How much is income protection insurance?

We're looking at how much income protection insurance costs and how you may be able to save money on your insurance policy

A photo of Grace Lynch, the author

By Grace Lynch

Published on: 22 September 2022

4 min read

How much is income protection insurance?

Value for money is very important for most people, especially with the UK in a cost of living crisis. You want to make sure your home and family are financially protected, but you also don’t want to pay ridiculous prices to put this protection in place.

Income protection can be a great way to help provide for your family if you are unable to work due to illness or injury for an extended period of time. These policies can be very cost effective, and you can potentially save on your cover, if you do a bit of research before applying.

How much does income protection insurance cost?

There isn’t one definite price for income protection insurance as there are various things that can affect how much you will pay for your policy.

We have all experienced buying something in one shop to then find it is cheaper somewhere else. The same can be true with insurance policies, so the provider you choose can really affect how much you pay. Other things to consider include:

All these things will affect how much you pay for your income protection policy. It might be tempting to simply choose the policy with the lowest price but consider carefully how much cover you need first. The last thing you want is to realise:

a)    The monthly payments from a claim aren’t enough to cover your essential expenses e.g. your mortgage and household bills

b)   You can’t claim for as long as you need to if you were very seriously ill or injured

Think about all your standard monthly expenses when deciding on your level of cover, to avoid the possibility you will still struggle significantly without your regular income.

How much income protection do I need?

One of the main things affecting how much your income protection insurance costs is the level of cover you choose. There are few key things to think about when trying to decide how much cover you will need:

  • Do you have dependents that rely on your income? (children or adults)
  • How extensive do you need your cover to be? (Some policies cover accident and sickness, some only cover accidents and occasionally there will be policies that cover accident, sickness AND unemployment)
  • Do you have a mortgage or rent that will need to be paid?
  • Do you have any debts that you repay regularly?
  • Do you have any finance agreements? (e.g. mobile phone contract, car finance)
  • Do you have other insurance policies to pay for? (e.g. life insurance, car insurance)
  • Are you employed or self employed? (self employed people will not be able to access some forms of support e.g. state benefits including Statutory Sick Pay or ‘SSP’)
  • Do you have access to workplace sick pay, Statutory Sick Pay, or other forms of support?

It is a good idea to sit down and work out exactly how much you pay each month for your regular expenses. That way you will have a more solid idea of how much (£s) you will need any monthly claim payments to cover, so you can continue to live comfortably as you recover before returning to work.

Cost of different types of income protection insurance

Certain types of income protection insurance will cost you less than others. This is because some policies will offer you more cover or will pay out to you for longer, and you will have to pay slightly more each month because of this.

The 4 options for income protection insurance are:

Short term income protection insuranceCosts less than long term income protection.  
Provides tax-free monthly payouts for 6 months -2 years maximum (depending on the policy).
Long term income protection insuranceThe highest priced income protection policy in most cases.  
Provides tax-free monthly payouts for many years and can even pay out right up until you retire.
Good for very long term periods of sickness or serious injuries.
Personal accident insuranceCan be a good alternative to standard income protection insurance for people with a lower budget.  
Will only pay out for accidental injuries and does not pay out for illness.
Guaranteed sick payCan provide monthly payments for up to 12 months maximum.  
No medical checks are needed as the cover is guaranteed to be accepted.

Here are our top tips for saving money on your new (or current!) income protection insurance policy:

  1. Compare policies across multiple insurers to make sure you are getting the best price available
  2. Don’t be tempted to take out more cover than you need, you can cover up to 70% of your income – BUT you don’t have to cover the full 70%! (as long as all your main expenses are covered)
  3. Make sure you apply to the right insurance provider (some will be better than others when it comes to covering people with medical conditions for example)
  4. Choose the right type of income protection insurance for your own budget (if you can only afford to cover accidents for now, it is better to have some cover than none)
  5. Consider a longer deferred period if you can afford to, as this can reduce the cost of your policy
  6. Speak to an income protection expert for advice and support with your application

Resources

Safe Workers – Average sick days in the UK 2022

Statista – Sickness absence rate in the UK 1995-2021

Citizen’s Advice – Check if you can get sick pay

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