| Premiums for income protection
insurance are calculated based on your occupational salary and the amount of benefit
you would require. Most insurance companies in the UK dictate that you can select
a maximum monthly benefit that is either a certain percentage of your salary,
or a specified cash figure, whichever is lowest. For instance, a company might
state that your maximum monthly benefit could be either 70% of your gross monthly
income or £2000; whichever is the lowest figure. Either way, the lower the
monthly benefit that you select, the lower your premiums will be.
Another factor that will influence your premiums is the exclusion period. Consider
how long you would be able to wait before your policy benefit is paid out. Usually
the amount of time you could wait before payment is made, referred to as the 'deferred
period', the lower your premiums will be.
When you first set up your policy you will also be asked how many benefit payments
you would wish to receive in the event of a claim. You may be able to choose between
a maximum of 1 or 2 years, or 12 and 24 payments. The fewer payments you choose
to receive, generally, the more likely you will be of getting a cheap premium.
The amount of cover you have will obviously influence the cost of your premiums.
Usually insurance companies offering income protection insurance provide cover
for unemployment, disability or accident and sickness, or both. A combined policy
offering cover for both unemployment and disability will have more expensive premiums
than a policy that covers, say, just disability. If you choose to In short, by
opting for cover that is less comprehensive, you are more likely to get a cheap
income protection insurance policy - although you will obviously forgo cover.
Read more about the policy types and options available to you here.
Your age will also influence the cost of your premiums. The older you are,
the higher your premiums are likely to be, as your age will mean that you are
considered a higher risk case. Some companies will also take your sex into consideration,
as a woman you could be put at a disadvantage when it comes to premiums, as women
in the UK are statistically more likely to make a claim. Some companies will also
ask you if you are a smoker. If you are a non-smoker (you have not smoked for
a period of at least a year) then you will most likely pay lower premiums than
a higher-risk smoker.
However, you must remember that every insurance company is different. Some
insurers make a point of not taking age, gender, occupation or smoking habits
into consideration when they calculate your premiums. Ask your insurance company
if you are unsure of the way in which they calculate your premiums.
Some companies allow you to choose the type of premiums that you would prefer
to pay, whether reviewable or guaranteed. Guaranteed premiums might not be the
cheapest option at first but will not be subject to any unforeseen price rises
throughout the term of your insurance policy. Reviewable premiums, conversely,
are often the least costly option when you first take out your policy, but could
be subject to price increases.
|
