How to Save Money on Income Protection Premiums
Low cost income protection options can be an affordable way of protecting your income if you are unable to work due to ill health.
There are two ways to have low cost income protection insurance, Stepped benefit's and limited claims period.
What is a Stepped Benefit?
With some providers such as Legal & General you can have an income protection policy that provides a lower income after the initially deferment period with a larger benefit being paid after a second deferment period.
This can work well for someone who's employer pays say 50% sick pay for the first 6 months of illness or some one who receives fully pay for 3 months and half pay for three months.
How does a Limited Claim Period Plan Work?
A standard income protection insurance can potentially pay you a benefit for the full term of the policy if you are unable to work as a result of illness or accident. With a budget income protection plan this is limited to a maximum of two years.
This reduces the risk to the insurance company and hence reduces the premium payable which could save you as much as 64% when compared with a standard policy. Below are some example premiums for LV's budget policy compared to their standard income protection plan.
Examples of how Budget Income Protection can help you with the cost
The table below shows example costs of a level term life insurance policy. Quotes are based on a non-smoker, in good health, with a 20 year term for a £100,000 of cover.
| Example premiums | Std Income protection | Budget income protection |
|---|---|---|
| Male or Female, 35, non-smoker, rate class 1, 6 month waiting period, guaranteed rates, £1,000 benefit a month, inflation linked, expiry age 65 | £11.75 a month | £5.65 a month |
| Saving 52% | ||
| Female or Male, 30, smoker, rate class 1, 6 month waiting period, guaranteed rates, £1,000 benefit a month, inflation linked, expiry age 65 | £13.67 a month | £6.63 a month |
| Saving 51% | ||
| Source Webline 23/05/2024 |
Below is an over view of LV's standard income protection compared with their budget option.
| Benefits | Income protection | Budget Income Protection |
|---|---|---|
| Own occupation cover - For 78% of occupations we cover, we offer own occupation cover. This means that your clients are protected if they’re unable to do their own job, rather than one they may be suited to do. |  |
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Salary limits - You can select a monthly amount of cover up to 60% of your income (before tax). |
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Cover to age 70 - To apply, your clients must be aged between 17 and 59 years. However for 94% of all occupations that we cover, cover can continue right up to age 70. |
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| Guaranteed Premiums - Can help your plan, so they know how much they will always pay. | |
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| No standard exclusions - LV= has no standard exclusions. | |
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Choice of waiting periods - All occupations we cover, have a choice of a 3,6, or 12 month waiting period. |
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Inflation-linked cover - We simply increase the premium and cover by the rate of inflation each year (using the Retail Prices Index). |
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Review of three years income for self-employed - We’ll take into account an income averaged over the last three years. |
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| £1,500 benefit guarantee - When you claim, they guarantee that no matter what your income is, they’ll receive at least £1,500 a month (or if they chose cover of less than £1,500 then the amount they chose). Please see the policy summary for terms and conditions. | |
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Career break option - We’ll provide cover up to a maximum of £1,500 a month (plus inflation linked increases that may apply). |
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| Maximum Claim Duration | Unlimited - Until the end of the plan or when the maximum age is reached, or whichever is sooner. | Maximum 2 years Policy holders can make as many claims of up to 2 years in duration as they need to, providing that they have returned to work for a minimum of 6 months between each claim. Homemakers will receive a monthly benefit for up to a maximum of two years for any single claim. If we have paid a single claim to a homemaker for two years, the policy will stop. |
Source LV 05/2024
Legal & General Low Cost Option
This option provides a way of keeping the cost of your premiums down. If you meet the definition of incapacity they will pay benefit for up to a total of five years, including any time payments are made under the Hospitalisation benefit. After the benefit has been paid for five years, your policy will end.
There are other providers who’s products may be more suitable to your needs. With Go Direct we provide a phone based advised service to help you find the right cover all with our great online prices.