How much does protection insurance cost?

Depending on your circumstances – your lifestyle, earnings, whether you have a family – protection insurance can provide an income should you become unable to work through accident or illness.

There are a number of different insurance products out there, each designed for people in different circumstances. For example, someone in their 20s with no mortgage or children, will not have the same needs as someone in their 30s with a home, a family and a larger income.

Monthly payments, known as premiums, vary greatly but can start at a few pounds a month for basic policies. This guide can help you work out what factors will affect the cost of an insurance policy and which product is right for you.

What impacts the costs?

Not sure what something means? Have a look at our Protection insurance glossaryopens in new window.

When it comes to protection insurance, it’s not simply a case of signing up to the cheapest policy. There is no one size fits all and your monthly payments (also known as premiums) will depend on a number factors, including:

  • Age
  • Marital status
  • Whether you smoke or have previously smoked
  • Health (your current health, your weight, your family medical history)
  • Job (some professions carry a higher risk than others and may mean you have to pay more each month)
  • Lifestyle (do you, for example, practice extreme sports?)

How much cover you might need will depend on:

  • Take home pay
  • Day to day living costs
  • Debts
  • Mortgage/rent

It is useful to weigh up the costs of a policy against the risks of being uninsured. For example, how much would you lose if you became ill and found yourself unable to work? How would you cover your essential costs?

What insurance product is right for me?

There are a wide range of insurance products available and each protects against different events and offers different levels of cover.

For example, some life insurance policies will pay out if you die or get a specific illness, however, you will need a separate product to cover you in case you stop work due to a long term illness or are made redundant.

Ideally, you should try to save up enough money to cover three months of living expenses. However, it can take time to save up this amount of money and protection insurance might be a cost effective way to protect yourself.

The insurance products you sign up to should reflect your personal circumstances and what you want to protect.

For example, a life insurance product usually makes sense for couples or parents, but not for someone with no dependents, as the policy only pays out when you die. Someone with no dependents might, however, be interested in income protection insurance, which covers you if you lose your salary due to illness or injury.

If you can’t afford to get cover for everything you want to protect, think about what you would prioritise or consider a lower level of cover, as some protection might be better than none. You might, for example, decide to protect your mortgage or rent payments. Read our Take action: work out your options section below for more details.

The right product for the right time

Cost of income protection – example

Household one

Imagine a young couple, both healthy, with children and a mortgage and both working full time with annual salaries of £35,000 and £23,000. Their combined weekly household income is £860, with the main earner bringing home £515. The main earner pays £18.35 per month for an income protection policy covering 65% of her income.

If the household’s main earner falls ill and becomes unable to work, their weekly income will drop to £350. In this case, the income protection policy will cover 65% of the main earner’s salary, totalling £355. The couple’s weekly income will be £705, meaning it’s possible for them to cover their mortgage payments and other expenses.

Household two

Now picture an older couple, with no children, both working, with a mortgage, but also with health problems. They have annual salaries of £27,000 and £19,000 and a combined weekly income of £755, with the main earner bringing home £405 and the secondary earner £295. The main earner pays £31.40 per month for an income protection policy covering 60% of his salary.

If the main earner finds himself unable to work, their weekly income falls to £295. The income protection policy adds a further £310 to this making a total of £605. This makes it possible for them to manage their mortgage payments and other expenses.

Take action: work out your options

The key to deciding what protection you need is by weighing up the risks and benefits of protection insurance against the cost and coverage. It’s up to you to decide what’s important to you and how you will protect it.

  1. The first step is to set yourself a goal. What do you most need to protect? This could be providing for your children, covering your mortgage payments, or simply your earnings.
  2. Next consider what protection you already have. For example, if you’re employed you may have a benefits package that includes a form of life insurance, or income protection for a set period should you find yourself unable to work due to illness or injury.
  3. Finally, work out what protection insurance you want based on the cover you already have and what you want to protect.

For example, if you are self-employed and have children you might decide to get income protection insurance, to cover you in case you become unable to work, and life insurance to make sure your dependents are taken care of if you die unexpectedly.

On the other hand, if you have children and are employed by an organisation which has a ‘sick pay allowance’ in its benefits package, you might feel you just need life insurance.

You can find out more about financial protection in our dedicated guides:

What financial protection might you already have?

Read our at-a-glance guide to find out more about the differences between protection products

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