Income Protection Policy Factors

An income protection policy like any other insurance is priced according to a number of factors either personal to you or specific to the cover you have chosen. An income protection policy is designed to pay out a monthly income should you be rendered unable to work due to illness or injury for a prolonged period of time.

Peace of mind knowing if you be unable to work due to illness or injury your income is protected.

Monthly tax free payments of up to 65% of your gross earnings paid direct.

Level and length of cover can be tailored to your specific requirements.

Multiple claims can be made over the policy term

Protection whether employed or self employed.

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Personal Factors Affecting an Income Protection Policy

When looking to buy insurance there are a number of factors which you should be aware of that are likely to affect your monthly premiums, some of these you can control to help reduce the cost however unfortunately there are other factors such as age and other personal factors which we are unable to control.

We all have to deal with growing old, the aches and pains, wrinkling skin and greying hair; and with age tends to come more ailments, it is a part of life. Not only do we get more aches and pains but are insurance premiums increase as well, with age comes a greater risk of needing a prolonged period off work thus insurers price this risk into the premiums quoted.

One personal factor we can control, we all know how damaging smoking can be, not just to our health but also to our pocket.  Many find it hard to kick the habit but if you are trying to quit stick to it, you will see it pay dividends in the long run.

Insurers understand the health risks associated with smoking and this will in turn affect your premiums, if you are a smoker and have insurance your premiums will be inflated to reflect the additional risk you place on the insurer. Most insurers define a smoker as any person who has used tobacco products in the past 12 months, so if you have recently quit and are coming up to the 12 months smoke free you could see a little bonus for your efforts in reduced insurance premiums

Any conditions you have suffered prior to requiring cover could well affect your insurance premiums. Depending on the severity of the condition it may have no affect on your premiums, the insurer may consider you higher risk and inflate your premiums or in the most severe cases the insurer may decline to provide cover.

However with this we must state how important it is to declare in full any conditions on applying for an income protection policy, failure to disclose any important information that could affect the insurer’s decision to cover you could result in your policy being void and not paying out in the event of a claim.

Given an income protection policy is used to protect your income should you suffer prolonged illness or injury it is no surprise your occupation will have an effect on the premiums quoted. The higher risk your job the more expensive your cover.

Cover Options Affecting your Income Protection Policy Premiums

With any insurance the greater the cover you require the more expensive it will be whether that be the amount of cover you require, the length of time the insurance covers you for or the flexibility the pan provides. With an income protection policy you can set the length of time a claim will pay out for, at the commencement of the policy you can choose a benefit payment period from as little as 2 or 5 years to a policy which will continue to pay out should you be unable to work right up to retirement.

As with the length of cover the level of cover required will affect the premiums, most insurers will allow you to select up to 65% of your income as a monthly tax free payment. The larger the proportion of your income you wish to cover the more expensive the plan will be.

An income protection policy has a waiting period or deferred period similar to that you would see with mortgage protection insurance. A deferred period is the length of time you must wait from initially filing a claim to receiving a payment, a deferred period can range from as little as 4 weeks up anywhere as much as a year. The longer the deferred period the less likely the insurer will have to pay out and the cheaper your premiums.

Next steps

There are a number of more subtle options to consider when looking to buy income protection insurance such as benefit indexation, which essentially means if your payout was to span years the monthly benefit you would receive would increase in line with the retail price index (RPI) year on year thus the real value of monthly benefit you receive would not be eroded by inflation.

If you are considering income protection insurance and need more information, some advice or would like to compare an income protection quote from the leading insurers let us know, dealing with insurance day in, day out, we are in a great position to help.

Other useful sites for insurance information include DirectGov and the FSA’s money made clear site.

This entry is filed under Income Protection Guide.