Income protection insurance can be a smart way of protecting your finances in the event that you have to stop working and lose your income.

This form of insurance is designed to provide you with a regular income if you’re unable to work due to an accident, injury or illness. Payments will typically continue until you’re well enough to work again, until you retire, or until the end of an agreed term.

Bearing in mind how unpredictable life – and our health – can be, this might sound like a tempting idea, so that you can have some financial support in place in case something goes wrong. But on the other hand, taking on an additional cost in the form of monthly premiums can put you under greater financial pressure.

That’s why we’ve put together this list of five ways you can cut the cost of income protection insurance to help make cover more affordable.

1. Shop around for cover

As with any form of insurance, it always pays to shop around before buying, whether you are looking at taking out cover for the first time, or thinking about renewing because your existing policy is coming to an end.

If you are researching income protection for the first time, think about exactly what you need out of a policy, then compare quotes from any providers that fit the bill.

2. Choose the right level of cover

When you take out income protection insurance, your insurer might ask you to specify a “class of occupation” for which you’ll be covered. Your options, from most to least expensive, will typically be “own occupation”, “suited occupation” and “any occupation”.

If you select “own occupation”, your policy will pay out if you become too ill or injured to do your specific job, and you won’t be expected to look for another job. This is the most expensive level of cover but also the most likely to pay out.

“Suited occupation” will pay out if you become too ill or injured to perform your current job or similar ones that you may also be qualified for.

“Any occupation” is the cheapest level of cover, but also the least likely to pay out, as you can only claim in the event that you become too ill or injured to perform any kind of role at all. For example, if you work in music and start to experience hearing issues that make you unable to continue at work, you would still be considered capable of taking up a different job, so the policy would not pay out.

While “any occupation” and “suited occupation” are not as likely to pay out as the most comprehensive level of income protection, this also means that the premiums tend to be lower. Remember however, that if you are unable to stay at your current job, you might be expected to look for a different one if you’re well enough to do so.

3. Stay healthy

As with most forms of insurance that have some kind of link to your health and wellness, the more you can do to minimise your chances of getting seriously ill, the cheaper your premiums will tend to be, as your provider will view you as lower risk.

You’ll usually be asked for information such as your weight and whether you smoke when you take out a protection policy. If you are able to stop smoking or lower your BMI by the time before you take out cover, you should be able to reduce your premiums. Bear in mind however, that insurers will usually only consider you a non-smoker once you have stopped smoking for a year.

4. Opt for a longer deferral period

A deferral period refers to the length of time between when you first become unable to work and when your policy starts paying out. The longer the deferral period – that is, the longer you can wait to start receiving payments – the cheaper your premiums will usually be.

However, before picking the shortest possible deferral period and going ahead, you should think about your current financial situation and what kind of support you already have in place in case you have to stop working.

For example, your workplace may offer a specific sick pay policy that will cover you financially for a few weeks or months. Or, you may have shared income with a partner or a decent savings pot meaning that you wouldn’t need to rely on payments coming in straight away.

Make an estimate of how long you would be supported until the income from your protection insurance becomes vital, and consider setting this as your deferral period to see if this helps you net lower premiums.

5. Choose a short-term policy

While income protection policies are usually designed to pay out either until you retire or recover enough to return to work, you can sometimes opt for a short-term policy that will pay out for a set amount of time only.

The length of this term will differ between insurers, but it will almost always mean cheaper premiums than a long-term policy.

Of course, the downside to this option is that if you undergo a long-term illness or serious accident, your policy term could end before you are able to go back to work, which would leave you without financial support. Make sure you fully understand the pros and cons of opting for a shorter term before going for it.

Learn more about income protection

It’s not pleasant to have to think about how you’d manage if you fall ill or have an accident, but it’s important to at least consider income protection and whether it might be beneficial for you. Our article Income protection explained goes over this type of insurance in more detail in case you want to learn more about it.

It’s also worth looking into other types of protection to see if they might be more appropriate for you. For example, you could think about critical illness cover, which will pay out a tax-free lump sum if you are diagnosed with a serious illness or disability that is specified in your policy. Read more about this in our article Everything you need to know about critical illness cover.

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