How much does income protection insurance cost in the UK?

If you’re considering an income protection policy, you’re probably wondering how much it will cost and what will affect your premium.

We explore what you need to know before taking out a policy.  

What is income protection insurance?

Income protection insurance provides a replacement 'salary' when you cannot work due to illness or disability.

Unlike critical illness insurance, which pays a lump sum, income protection insurance pays between 50% and 70% of your income, usually every month, until you are well enough to return to work or your cover ends. 

Some policies are short-term and will pay out for a maximum of one to five years, while others are long-term and can continue until you reach retirement age.

The best income protection policies will pay out when you can’t do your specific job, while others will only pay out if you can’t work at all.

‘Own occupation’ policies are usually the preferred choice, but they are more expensive.

Learn more: Income protection vs critical illness: what's the difference?

What affects the cost of income protection insurance?

• Your job: If you choose a policy that pays out if you can no longer work in your current role or field, your premium will be higher than it would be if you were only covering not being able to work. Policies will also be more expensive if your job carries a higher risk of injury or accident.

• The length of your policy: The longer the potential payout period on your policy, the more expensive it’s likely to be. This is why policies that only pay out for one or two years are the most affordable.

• The length of your deferred period: This is the time you will need to wait before you can make a claim after you have stopped working. The longer you can manage before payments start, the cheaper your insurance will be.

• Your age: The older you are, the more you’ll pay. As with health insurance, the risk of illness and the chance of needing to claim increases with age.

• Your health: The healthier you are, the less you usually pay. As with health insurance, the risk of illness and the chance of needing to claim decreases with better health.

• Your hobbies and lifestyle: Any risky hobbies or lifestyle factors can increase costs. 

How much does income protection cost?

Narrowing down the cost of income protection insurance isn’t easy. What you pay is affected by many factors, from the level of coverage to your health and lifestyle. 

Cover starts at less than £10 a month, but the price you will need to pay for income protection will depend on many factors.

So, for example:

• The impact of age: At the age of 25, the average cost for a monthly income of £1,500 would be £18.42 per month, according to LifeSearch. By 35, this would increase to £26.17, reaching £61.46 a month at age 55. This is based on a three-month deferred period for a non-smoking office worker, with cover running until age 67.

• Occupation: A 25-year-old in a manual occupation (such as a painter and decorator) would pay an average of £33.42 each month for the same cover, rising to £52.15 for a 35-year-old.

• The length of cover: At age 25, the cost falls to £7.30 a month for an office worker if the payment period is limited to two years, or £9.88 for a 35-year-old.

Finding the best income protection policy

Finding the best income protection policy involves some research to make sure you choose the right one for you. However, an insurance broker can help you find the right policy.  

Below are a few of the highest-rated income insurance providers and the average payout rate.  

• British Friendly Society: 89% payout rate in 2023.

• LV=: 92% payout rate in 2023.

• Shepherds Friendly Society: 96.2% payout rate in 2022.

• Wesleyan Assurance Society: 97% payout rate in 2023.

Each provider will typically offer its own choice of deferred periods, payment periods and maximum income percentages, so it’s worth shopping around and considering what will best suit you. 

When you’re looking for affordable income protection cover:

• Act as soon as possible - costs will only increase with age.

• Check whether the policy covers you for temporary and permanent disability, as well as terminal illness.

• Confirm whether your provider and policy will cover any pre-existing conditions.

• Look at getting a policy with a guaranteed premium that will not go up over the years.

Learn more: The benefits of using an insurance broker

Is income protection insurance worth it?

The Financial Conduct Authority’s Financial Lives Survey (2022) found that only around 6% of people in the UK have income protection insurance.

Only you can determine whether this insurance is worth the monthly expense. However, before you make a decision, it’s worth thinking about how you would pay the bills if you were off-sick for an extended period of time. 

It may be particularly important if you are self-employed and not entitled to sick pay.

Get expert financial advice

Finding the right income protection policy for your unique circumstances can be stressful and time-consuming. 

If you’re struggling to decide and need advice, Unbiased can connect you with a qualified insurance broker.