Income Protection Insurance: How Much Does it Cost?


For UK citizens, Income Protection insurance can make available a consistent alternative income for an individual who, because of injury or illness, is unable to work. Usually, as per the rules, protection insurance is paid if an individual has been off work for a minimum of 6 months (this period is also referred to as waiting or deferred period) and the concerned person can pay a fraction of their salary till one or the other cases apply, such as they reach State Pension Age, return to work, or they die while claiming. In general scenario when the employee is working he gets his weekly income (after subtracting his national insurance and other taxes by HMRC). An individual can also check how much national insurance does he pay weekly.

Income Protection Insurance

It must be noted that Income protection is different from Payment Protection Insurance (PPI). Fundamentally, PPI takes care of the cost corresponding to loan payments or payment for least possible credit card due in case an individual was suffering from illness at work, usually for a period of one year or two at-most. If a person is sick, that person can claim for statutory sick pay (check how much is statutory sick pay for current year and calculate how much SSP you can claim). On the other hand, as an insurance policy, Income protection is remunerated as a once-a-month sum if an individual is not able to attend work because of injury, illness, or unemployment. This insurance policy is intended to shield living costs while an individual is not working and it will be paid continually until the individual returns to work. Additionally, if an individual is unable to return to work because of the above stated reasons, he/she will continue to receive the amount until they retire. Usually, policies pay around 60% to 70% of an individual’s gross (pre-tax) earnings per month into an individual’s bank account and this amount is tax free.

However, from an employer’s perspective, for Individual Income Protection policies or Group Income Protection policies, they can decide on how long the leave period can last before payments start. In case an employee is fit to get back to work, however on a lesser basis salary than they used to earn, they may carry on paying a decreased amount towards their income protection policy.

Also Read: Business Insurance

Best UK income protection insurance policies 2018

Insurance companies Policy (in no particular order)
AIG life Your Life Plan Income Protection
Countrywide Protect+ Income Protection Cover
British Friendly Society Protect
Royal London Personal Menu Plan
Wesleyan Assurance Society Personal Income Protection Plan (dentist, doctors and nurse plans available)
Aviva Income Protection Options
Connells Income Protection Cover
Legal & General Income Protection Benefit
Nationwide Income Protection Benefit
Skipton Building Society Income Protection Benefit
The Exeter Income One Plus and Pure Protection Plus
Liverpool Victoria (LV= ) Flexible Protection and Mortgage & Lifestyle Protection Plan
Vitality Life A range of Income Protection Cover products

Protection insurance cost

Depending on an individual’s situations – earnings, lifestyle, whether he/she has a family – protection insurance can make available certain income if he/she is not able to carry out the usual work related activities due to an accident or illness. There are numerous diverse insurance products, each customised for individual with different needs and circumstances. For instance, an individual who is in their early 20’s won’t have similar needs (they don’t have any pressure of mortgage or children), as compared to someone in their 30’s. For different insurance products, once-a-month payments, usually referred to as premiums, differ significantly ranging from a few pounds a month basis the type of policy opted.

Impact of insurance costs

The cost of an insurance product and premium (monthly payments) varies on multiple factors such as:

  • Age of an individual.
  • Marital status of an individual.
  • Whether an individual smokes or has smoked previously.
  • Lifestyle of an individual (exercise routine, sports etc.)
  • Health condition of an individual (present health situation, family medical history, weight of an individual).
  • Profession of an individual (certain professions involve higher risk as compared to others and might result in extra-premium cost).

Factors that determine the cover an individual might need will depend on personal debts, day-to-day cost of living, mortgage and rents, and take home pay of an individual). It is beneficial to weigh up the charges of a policy compared to the risks of being uninsured. An individual must be able to answer the following questions:

  • How much will he/she loss if they fall ill and are unable to attend work regularly.
  • How will an individual cover their essential costs?

Finding the right insurance product

Finding the right insurance product

As stated earlier, there are numerous insurance products available in the market and each product protects in contradiction to diverse events and provide different levels of cover. For instance, certain life insurance products pay-out if an individual get a specific illness. However, UK citizens will require a separate insurance product to cover them in case he/she stops discontinues to work due to a long-term sickness or out of work. The insurance product an individual signs up to ought to reflect an individual’s personal conditions and what he/she aims to protect. For instance, a life insurance policy would be more apt for parents or couples, and not for somebody with no dependents (a life insurance policy only pays out when an individual dies).

On the other hand, an individual with no dependents will be more fascinated by an income protection insurance – it will cover an individual in case he/she loses salary because of injury or illness. Also, if an individual is unable to get cover for everything he/she wants to protect, then in such a scenario it is imperative to prioritise the needs or consider a less expensive cover – some amount of protection is better than no protection. Let’s understand this with a few examples:

Example 1: A young couple, both healthy and working full-time, with a child and a bank loan with annual salaries of £40,000 and £22,000 respectively. Their collective household income per week is £960, with the prime earner getting home £615. Assume, the prime household earner pays £21.35 per month towards an income protection policy taking care of 65% of his/her income. In order to protect the loss of weekly income, in case the prime earner is unable to attend work, the income protection policy will cover 65% of the main earner’s salary, amounting to £400.

An essential decide to opt for the best protection policy can be made by assessing all the risks and remunerations attached to a protection insurance plan. Firstly, set a goal and decide what protection is required. Secondly, evaluate the protection which is already there and finally, work out the right protection insurance based on the cover which is already there and what cover is required.

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About the author
Blog Author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.

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About the author
Blog Author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.


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