Cost of Income protection Insurance
You pay a monthly premium throughout the term of the policy. Cost depends mainly on:
• Your age – at the time you start the policy. Older people are more likely to suffer an illness, so pay more.
• Your sex – gender can have an affect on the premium you pay.
• Your health – at the time you start the policy. If you have existing health problems you might be refused cover or have to pay more.
• Your job – some jobs are more likely than others to contribute towards illness. For example, a bank clerk is deemed to have a very safe job but a deep sea diver runs high risks and so would have to pay more.
• Hobbies and lifestyle – for example, smoking makes you more likely to become ill, so you'll pay more.
• Waiting period – once you claim, there is a delay before payments start. You can choose how long this is - for example, from 4 weeks up to 104 weeks. The longer the waiting period, the less you pay.
Access
• If your health is poor or your lifestyle is considered risky, you may be refused cover or have to pay more than normal.
Terms
• Check whether you already have protection in place in case you get incapacitated, and for how long that protection would last. For example your employer may have an income protection scheme in place you can benefit from, or you may have a payment protection insurance that covers your mortgage.
• Check whether the policy reduces what it pays out if you receive state benefits or claim money under any other insurance policy.
• Some policies only pay out if you can't do any work, but you would have to be seriously incapacitated for you not to be able to work at all. Others cover being unable to do any work for which you are suited. The best pay out simply if you can't do your normal job, but premiums tend to be more expensive.
• Most policies would pay out until your reach age 65 or when you have chosen the cover to end.
• Check how different occupations are treated. Different insurers put the same job in different risk categories.
• Does the cover increase in line with inflation?
Some advisers suggest that critical illness cover (CIC) – which pays out a tax-free lump sum if you are diagnosed with a life-threatening condition listed in the policy – is a cheaper and simpler alternative to income protection insurance. But there are lots of common situations when CIC would not pay out – for example, if you had back problems or a stress-related illness. Additionally, not all occurrences of the critical illnesses listed are covered, for example some early stages of cancer are not covered.
Link to previous article Income protection Insurance - I.
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