As it stands, the cost of your income protection will
depend on a variety of factors:
The annual level of income you need the policy to
provide. This can range from 50% to 65% of your previous
year's income.
The Benefit Period. This is the length of time
you need it to pay out for. Most policies will pay out for
a fixed term (the cheapest), until normal retirement age,
or for the rest of your life (the most expensive).
Age. The older you are, the more you are likely
to pay. You will not normally be able to get cover beyond
normal retirement age.
Sex. Believe it or not, women are statistically
much more likely to be off work due to illness. Therefore,
if all else is equal a woman's premiums are usually higher
than a man's.
Occupation. People who work in extremely stressful
or dangerous professions such as firemen may have to pay
higher premiums.
Health and medical history. Sometimes you can
be refused cover if you have pre-existing medical conditions,
sometimes the premiums will be raised.
Whether you smoke. With the exception of one major
provider, almost all insurers will charge a higher rate
to give cover to a smoker than a non-smoker.
The deferral period. The selection of deferral
period can have quite an effect on the price of the policy.
Obviously, a long deferral period means that the company
is less likely to pay out, so the policy is cheaper. If
you have a deferral period of 4 weeks, then there is a reasonable
chance that you will have several periods of 4 weeks out
of work through illness before you retire or terminate the
policy. This will make it more expensive.
Definition of disability. The more specific the
cover, the more expensive. In other words, if you want to
be covered for any injury, illness or disability that will
prevent you from going back to the exact same job, you will
have to pay more for it. Being unable to perform any sort
of job whatsoever is less likely, so it is cheaper to insure
against this.
Type of premium. A guaranteed premium may start
out to be slightly more expensive than a renewable premium.
This is because the insurance company is protecting itself
against high general levels of future claims from the beginning.
Renewable premiums are cheaper at the start, but you may
find that your premiums rise drastically to cope with a
really bad financial year for the insurer.
