How can I reduce the cost of my income protection?

Income protection pays a regular monthly income if illness or injury stops you working. It is not a lump sum and it is not a payout for redundancy: it replaces part of your earnings while you cannot do your job, and it covers a wide range of conditions, essentially any illness or disability that leaves you unable to work for a period of time, including physical conditions such as cancer or a heart attack and mental health conditions including stress¹. Typical payouts run at around 50% to 70% of your salary¹.

There is no single price. What you pay is built from choices you make at the outset and from facts about you that you cannot change. The main levers are how long you wait before payments start, how long the policy will pay for, how much cover you buy, and how the insurer defines being unable to work. Age, health, job and lifestyle sit underneath all of it.

This page sets out each lever, what it does to the premium, and what it gives up in return. It also covers what happens if you stop paying, and where to get free help if a claim is refused.

What sets the price of income protection

The costs of taking out income protection insurance are affected by your age, your health, your job, hobbies and lifestyle, the waiting period, and whether you might be prepared to do other kinds of work than your own⁵. One insurer lists the same set of factors in its own words: age, job risk, health and lifestyle, amount of cover, deferred (waiting) period, and benefit term⁶.

Two of those are fixed. You cannot change your age, and you cannot rewrite your medical history. The rest are choices, and they are where the cost can be brought down. Prices can vary depending on your job, health and the level of cover, and cheaper policies may offer a lower level of protection, so it is worth checking what is included¹.

It helps to know where income protection sits against similar products. It tends to be more expensive than mortgage payment protection insurance⁴, and it is generally more costly than MPPI⁴. That is because it does more: MPPI-style cover is tied to a mortgage payment, while income protection replaces lost income if you're unable to work due to illness or injury⁴. It is also a long-term insurance policy, designed to make sure you have some cover for yourself and your family over years rather than months⁷.

One point that catches people out: income protection won't usually pay out if you lose your job, are made redundant or choose to stop working, because it is built around incapacity rather than unemployment⁸. If redundancy is the risk you want to cover, that is a different product. See short-term income protection and accident, sickness and unemployment cover for how that works.

A longer deferred period means a lower premium

The deferred period is the amount of time you have to have been off work before the policy will start paying you benefit, agreed when you took out the policy⁹. It is the single most direct lever on price. Longer waiting periods reduce your premium, while shorter periods increase it⁶. One insurer puts it simply: generally, the longer the deferred period you choose, the cheaper your monthly premium is likely to be¹⁰. Another says the longer the waiting period, the more affordable the monthly premium can be¹¹.

The options are fairly standard. One insurer's guide describes a set deferred period, usually of four, 13, 26 or 52 weeks, bearing in mind that longer periods usually mean lower premiums². Independent guidance describes a deferral period that can generally range from one to 12 months after you were taken ill, with longer waiting periods often reducing the cost⁴, and elsewhere as anything from 4 weeks to 1 year, where the longer the wait, the cheaper your monthly premium will be¹². Typically, the default deferral period is 13 or 26 weeks, but it can be as short as four weeks⁴.

The practical question is how long you could keep paying your bills without a payout. Employer sick pay, savings and a partner's income all sit in that gap. If your employer pays full pay for six months, a four-week deferred period buys cover you would not claim on in that period.

Short-term or long-term cover: how each one pays out

Income protection is usually written as a long-term policy, but you can buy a shorter payout period to cut the premium. Options exist for maximum claim periods of one, two or five years, which can make cover more affordable³. Cheaper short-term policies may only pay for one or two years⁸.

The trade-off is what happens if you are still unable to work when the payout period ends. A policy that pays for two years stops after two years, whether or not you have recovered. A policy written to run to the end of the term keeps paying while the claim lasts. One insurer's reducing benefit option shows how a middle path can work: it will pay your full insured income benefit for the first two years of a claim but then reduces to 50% for the third year of the claim and 30% from the fourth year¹⁵.

There is a regulatory definition worth knowing, because it separates two products that sound alike. Short-term income protection means a contract of insurance which provides a pre-agreed amount paid directly to the policyholder or the policyholder's nominee in the event that the policyholder experiences involuntary unemployment or incapacity as a result of accident or sickness¹⁶. That unemployment element is what long-term income protection normally leaves out.

Cover is available beyond employees. Income protection is also available for the self-employed and small business owners³, and self-employed individuals can indeed take out income protection insurance⁴. If you are self-employed, you can typically claim the premiums for income protection insurance as a business expense against your taxable income¹⁷, which reduces the real cost. There is more on this in Can self-employed people get income protection?.

Choosing the right benefit amount and cover length

You can choose the amount of cover, your waiting period and duration of your policy¹⁸. Those three choices set the premium alongside your personal details.

On the amount, insurers cap what they will pay, and the cap is a percentage of earnings rather than a cash figure you pick freely. One insurer covers up to 60% of your gross annual income, up to £60,000 a year, then 50% of your gross annual income over £60,000 a year¹⁹. Another describes a maximum benefit usually up to 65% of your annual salary¹⁷, and elsewhere as up to 65% depending on the insurance provider¹⁷. Independent guidance puts the range at usually 50% to 75% of your gross monthly work salary¹². One insurer's policy conditions set the yearly benefit as the lowest of 12 times the benefit amount, an amount equal to 55% of the insured person's income less applicable deductions, and £150,000 yearly benefit²⁰. Another of its conditions caps the annual benefit at an amount equal to 55% of income less applicable deductions, and £130,000²¹.

The reason for the cap is to stop cover becoming a better deal than working. You can have more than one income protection policy, but the total amount you can claim is usually capped at a percentage of your pre-disability income across all policies to prevent over-insurance¹⁷.

On length, the minimum benefit term for income protection is five years, and the maximum is 51 years¹⁴. A shorter term costs less. So does a smaller amount of cover, though the gap between your outgoings and the payout is what you would have to fund yourself.

Own occupation, suited occupation or any occupation

How the insurer defines being unable to work changes both the price and the chance of a claim succeeding. There are four main categories for disability in income protection insurance: own occupation, any suited occupation, any occupation whatsoever, and total disability⁹. Cover written on your own job or occupation, or your job or a similar one you are qualified or have the experience for, is the more generous end of that list¹².

The distinction matters at claim time. A policy that pays only if you cannot do any occupation whatsoever will not pay a surgeon who can no longer operate but could still teach, whereas an own occupation policy would. The broader the definition the insurer accepts, the more claims it expects, and the more you pay.

This is one of the areas where the cheapest quote can be the weakest cover. Prices can vary depending on your job, health and the level of cover, and cheaper policies may offer a lower level of protection¹. The definitions are set out in full in Own occupation, suited occupation and other income protection definitions.

Where you have more than one occupation, the income from all of them will be taken into account to calculate the benefit payable¹⁴.

Guaranteed or reviewable premiums

Premiums on income protection policies can stay fixed, which means any money paid will probably also stay fixed, or they may increase by a fixed amount each year, or by a variable amount linked to, for example, the Retail Price Index or National Average Earnings Index². Independent guidance describes the same three shapes: guaranteed premiums, reviewable premiums reviewed usually every 5 years, or age-costed premiums where your payments start low but get higher as you get older¹².

Reviewable premiums start cheaper and carry a risk. Your monthly premiums will start out at a lower level if you go for a reviewable policy²², but with reviewable premiums, the insurer has the right to periodically review your premiums and may opt to increase them²². Some reviewable policies start with low premiums that rise at each review, and if you don't accept the increase, your cover will fall²³. One insurer reviews the adequacy of its product pricing on an annual basis to make sure it remains sufficient to cover its income protection claims and management expenses¹⁵.

There is a floor as well as a ceiling. One insurer's terms state that after a premium review, premiums cannot be less than the lowest premium that was generally available to its policyholders for Personal Protection benefits at the policy start date²⁴. It also offers five-yearly reviews on certain benefits²⁴.

Guaranteed premiums are not always permanent. One insurer describes guaranteed premiums unless you make any changes to your plan or choose its Increasing Income Protection Benefit plan¹⁹. Increasing cover is a separate cost decision: if you choose it, the cover amount will increase each year to adapt to the cost of living, and monthly payments also increase over time²⁵. The comparison is set out in Guaranteed or reviewable life insurance premiums?.

Health, smoking and lifestyle: what an insurer looks at

You must give your insurer full details of you and your family's medical history, plus dangerous hobbies or a lifestyle that includes smoking, heavy drinking or drug taking⁵. That disclosure is what the insurer prices on, and it is also what it checks at claim time.

The factors are the same ones that price life cover: age, health, job, whether you smoke, policy length and amount of cover²⁶. Generally, the younger you are when you take out the cover the lower the cost²⁶, and premiums are generally lower if you apply younger⁶. One insurer's income protection applicants must be between 18 and 59 years of age¹⁸.

Smoking is priced in at application. Giving up before you apply changes the rate you are offered. Giving up afterwards is harder to convert into a saving: a few insurers enable you to sign a declaration that you have given up smoking and will reduce your premiums, but most insurers won't discount an existing policy²⁷. If you have been symptom-free of a condition for a period, reviewing your policy on a regular basis may let you reduce your premium²⁸.

Mental health conditions are covered, not excluded. Income protection covers a wide range of conditions, essentially any illness or disability that leaves you unable to work for a period of time, including mental health conditions including stress¹. The most common reasons claims pay out are worth reading before you assume a condition is uninsurable⁸.

Buying it: adviser, broker or direct

You can buy income protection insurance from an independent financial adviser, who may charge, or directly from an insurance company⁵. Brokers make their money from commission charged to the insurer and/or fees charged to you²⁹, so the cost is present either way, though it may sit in the premium rather than in an invoice.

What a broker adds is matching and claim support. They are experts who will help you decide what type of insurance and level of cover you need and recommend a suitable policy at a price you can afford, and they are paid by commission³⁰. An insurance broker will put your interests first and works for you, not the insurance company³¹. If you need to make a claim, your broker might speak to loss adjusters and claims departments³⁰, which can reduce the chances of your claim being rejected³⁰. Brokers also carry their own professional indemnity insurance³¹.

If you already hold a policy, some changes are possible without starting again. One insurer lists options to increase or decrease the amount you are covered for, update your name or address, change where you pay your policy from, change the end date of the policy, and increase or decrease the deferred period of payments to 4, 8, 13, 26 or 52 weeks after you go off sick³². More on this in Changing your cover: increase options, indexation and waiver of premium.

Where to get help

If a claim is refused or a policy is not what you were led to believe, the Financial Ombudsman Service handles complaints about income protection insurance and sets out what it can look at⁹. Free, impartial guidance on protection insurance and on using a broker is available from MoneyHelper³⁰.

If money is the immediate problem rather than the policy, National Debtline offers free debt advice, and its guides cover making the most of your money and other organisations that could help³³. Turn2us and Macmillan both publish information on benefits and financial support if you are living with a health condition¹⁶.