Income Protection is a very comprehensive form of insurance that can cover 70% of your salary if you’re left unable to work. This helps remove the risk of being left in financial hardship, should you fall ill or suffer an unfortunate accident. Before you cancel your policy it’s important to consider all your options, as there may be some things you can do that might change your mind.
My Income Protection policy is just too expensive
Because Income Protection covers so many things, it can be pricey when compared to other forms of insurance. However, there are a few things you can do to bring the cost down if you’re not comfortable with your current premiums.
Increase the deferral period
Changing your deferral period can massively reduce your monthly premium. The deferral period represents the time you have to wait before payments from your Income Protection policy begin.
The longer you wait for payments to begin, the lower will be to you each month.
Most people have very short deferral periods, as they typically couldn’t survive long without a regular wage, due to a lack of savings or unavoidable recurring bills. One way to work around this is to build a larger reserve of savings, & extend your deferral period. That way your monthly premium will come down & you’re better prepared to deal with the gap between claim and payout.
Reduce your policy cease age
Most Income Protection policies are set to expire at the age of retirement (usually around age 65). Reducing this expiry age to 60 or under will bring down your monthly premiums. This is because the risk of you suffering from illness after age 60+ is much higher. As a result, your policy premiums go up to reflect this increased risk.
Review your monthly outgoings & benefit
The monthly benefit is the amount you’re paid each month if you’re left unable to work. This should be in line with month to month living costs & existing earnings. Review your incoming & outgoings and see if you could cut costs elsewhere. This in turn may let you reduce the monthly benefit you need, which will bring down your monthly premium.
Do I need Income Protection if I have employer sick pay?
Sometimes people cancel their Income Protection policy because they move to a new job that offers sick pay, or they progress in their current role to the point where they get sick pay through work.
This is especially true for people who have been self-employed in the past and are used to not getting any sick pay. However, you have to remember that employer sick pay isn’t always generous and nor is it a long-term solution.
The minimum an employer has to offer you if you fall ill is Statutory Sick Pay (SSP) – and that’s only if you meet certain conditions as an employee.
Employers aren’t obliged to offer any more than this although some do, so it’s important to check your contract.
What’s more, company sick pay isn’t a long-term benefit. Someone in their thirties tragically struck down by an illness and never able to work again is unlikely to be paid sick pay from their employer for the next three decades until it’s time to retire.
That’s where Income Protection can step in to fill the gap. What’s more, any sick pay you do receive can be used to extend your deferred period and potentially reduce the cost of cover.
I’ve found cheaper Income Protection quotes – should I cancel my cover?
Well, it depends on what you’ve found – At Neilson Place, our finance experts search high and low to find you the right policy at the right price. This means we don’t just pick the cheapest option, but the one best suited to your situation. We can also pull quotes from all the UK’s leading Income Protection insurers, meaning we can generally find awesome deals.
If you’re getting super cheap quotes, it’s important to look out for certain things in the small print like:
- It’s a short term policy – some IP policies only last 24 months, meaning its less likely you’ll use it over its lifetime
- Watered down definition of Incapacitated – A cheaper IP policies may only cover a very narrow set on illness and injuries. Leaving you open financial risk.
- Extra stipulations & terms – Some cheaper policy types (PPI) may entitle the insurer to ask you to perform a different job within your skillset before paying out. We only offer IP that is job-specific – meaning if you can’t do your exact job, you’ll get a payout
- Can they tell you the claim data – It’s vital to get claim data for any policy you take out. If they can’t provide this to you, it’s highly likely the terms and conditions of the policy being offered are not favourable, making claiming highly difficult.