How much does income protection insurance cost?

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By Bob Atoo
September 17, 2015

We’re often told when we’re young that money is a subject that we shouldn’t speak about in public – at least in terms of asking people how much they earn, rather than what things cost.

This is all well and good if you’re looking to avoid awkward situations and side-step the risk of offending people, but there comes a time in everyday life when we have to grab the proverbial bull by the horns and address the thorny subject of ‘money’.

One such time is when we’re looking to arrange an income protection insurance policy, as money can sometimes be the deciding factor between whether we go with one insurance provider or another.

So it’s imperative that we establish just how much income protection insurance costs. Yet there’s no cut and dry answer to this, as a host of variables will contribute to the final cost of your premiums.

But before we get into all of them, let’s quickly recap what exactly income protection insurance is and why it you might need it.

In a previous guise income protection insurance was known as permanent health insurance or PHI, and essentially is a policy (either arranged personally by the individual or through the company with whom they’re employed in the form of a group income protection plan) which pays out the policyholder in the event of them being incapacitated and physically/emotionally unable to continue their means of employment due to unforeseen injury or illness.

Typically paying out until:

A) the insured party makes a full recovery and thus returns to work

B) they reach recognised retirement age

C) they die

Having said that, short-term policies are now widely available which come with a lower price tag too. Although habitually not able to recompense the individual should they become unemployed, income protection packages will often provide ‘back to work’ assistance for those off on the long-term sick. So that’s that covered. But as we said earlier, we now need to determine just how much this income protection insurance cover will cost; which necessitates scrutinising the very elements which fundamentally help the insurance provider arrive at a quotable premium.

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In summarised form – and no particular semblance of order – the following are universally considered to be chief amongst the factors that determine the cost of income protection insurance premiums.

Policy coverage

As far as many income protection insurance companies are concerned, the unexpected advent of a serious injury or the unpredictable nature of being diagnosed with a severe and career-hampering medical condition are the only two risks they will normally cover the policyholder against.

Having said that many providers now take on board the unemployment risk, and can routinely include redundancy protection as an additional feature. Perhaps unsurprisingly by opting to include this in your policy agreement, your premium will be affected by being hit with a higher rate.

Amount of cover

By means of a rough guide for the benefit of the novice, income protection insurance premiums are loosely calculated on a ‘per £100 of benefit you’d like to cover’ financial principle. Consequently the greater the policyholder’s level of coverage the more expensive the premium is likely to be.

Policy/premium type

Historically there are usually the three income protection insurance policy/premium types which any interested parties should be aware of: guaranteed policies, reviewable policies and age-related policies.

It’s up to the individual to decide which format best suits their specific needs from the outset and with a clear view of the future. Guaranteed policies deliver precisely what they promise on the tin, in as much as ensuring the premium the policyholder pays remains unfluctuating throughout the entire term of the policy; irrespective of it being 5 years or 25 years.

That is, unless you choose to increase the cover at a later stage, which will ramp up the premium you’ll pay. Although this is pricey in the beginning (said to be around 10% more than reviewable counterparts), this tends to regularly work out cheaper in the grand scale of things.

Reviewable policies are again relatively self-explanatory, underlining that the policy is subject to timely reviews by the provider (typically annually).

Unfortunately changeable and unfathomable economic transition could wreak havoc on your premium and realistically see it increase over the duration. Conversely though, it may end up costing you less than when you signed-up to it. A gamble whichever way you look at it.

Age-related policies will increase every 12 months (possibly resulting in the insured party stumping up 5 times more for their premiums over the life of their plan than when they arranged it), however you’ll know exactly by how much rather than it being predicted by uncontrollable inflation rates and outside interferences. What’s more, age-related plans aren’t revised at certain junctures according to lifestyle or occupation once the initial agreement is rubber-stamped. Understandably this option finds favour with those who would otherwise pay higher premiums thanks to dangerous occupations or being heavy smokers.

Deferred period

To keep this brief, the deferred period is in effect the duration of time between a claimant’s cessation of employment and the point at which the policy’s pay-out commences. The income protection insurance policy premium will be reduced (often significantly) should the policyholder elect to put in place a lengthy deferred period. Indeed, simply by expanding the deferred period from 4 weeks to 13 weeks has been known to minimise the monthly premium paid by some 40%, so well worth bearing in mind.

Medical history

Both yours and your family’s medical history will need to be disclosed when you approach any income protection insurance provider, so they can ascertain if there’s any major health issues prevalent in the family, which have a chance to recur at any time during the course of your proposed term of policy agreement.

In the event of certain dormant conditions being present the likelihood of being covered grow remoter, whilst if accepted by the insurer will be reflected in the premiums quoted.


Not exactly rocket science, but worth highlighting all the same.

The younger the individual/proposer is at the point of arranging income protection insurance, the more competitively priced the premiums will be, courtesy of the envisaged risks associated with the more mature person being lessened.

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Therefore the older you are when you take out cover, the perceived claim risk is seen as greater, coupled with the insurance provider having a shorter amount of time of premium collection to boot.

Meaning the premiums are hiked up accordingly.


For those not in the loop, there are risk categories associated with certain professional roles. If your occupation is deemed as high risk, this could easily be mirrored in your premium as the chance of your getting injured is deemed higher.

So for example if your normal profession is that of soldier, fireman or off-shore oil rig worker you should brace yourself for having to fork out more for cover than if you are a teacher, administration assistant or retail staff member. And then there’s the occupation classes to bring to your attention too, as this plays a pivotal part in premium calculations as well as defining when the insured party may actually be eligible for a pay-out as such. These are broken down into three classes, including own occupation (cover if unable to perform own specific job), suited occupation (protection if you’re physically/mentally unable to function in a position that’s suited to your particular experience and skills) and any occupation (cover if you’re unfit to pursue any occupation).

Smoker status

By disclosing that you’re a regular smoker (and it’s crucial that you’re honest from day one, otherwise you jeopardise receiving any future pay-outs entitled by successful claims), the odds are you’ll be met with higher income protection insurance policy premiums, as you’re adjudged to be at higher risk of succumbing to smoker-related illness and medical conditions.

The same rule of thumb applies to those proposers who admit to above average alcohol consumption, as once more they’d be viewed as more susceptible to illness than those who consumed an accepted amount.


Thankfully gender no longer acts as a variable when it comes to income protection insurance premium quotes as it did in the past. And that’s because of a 2012 European Court of Justice ruling which made it illegal to use gender as a factor in this instance. Which came as (long overdue) and good news to women who had until that juncture often been forced to pay more on account of them supposedly being at greater risk to gender-specific health implications such as pregnancy-related illnesses and breast cancer.