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IP too expensive?
Scale down the cost to meet your client’s budget

Income Protection

How to bring down the cost: skiing downhill

If Income Protection is too expensive for your client, there are ways to bring down the cost:

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Budget Income Protection - Short-term income protection can be significantly cheaper than full cover, and has a fixed maximum pay-out or claim period (two years with LV=).

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Waiting period - This is how long your client could wait before their Income Protection policy starts paying out; the longer the waiting period, the cheaper the monthly premium. You can base the waiting period on their level of savings compared to their monthly outgoings, or how much employer sick pay they’re entitled to.

Our Income Shortfall Calculator can show you how much your client could lose if they couldn't work and how much of their income they could protect with LV=

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Amount of cover - Assessing your client’s monthly outgoings will help you recommend the right amount of cover.

The more cover they have, the higher the premiums, so if some of their outgoings aren't vital (like holiday or days out) you could recommend a lower level of cover with your client cutting out non-essentials whilst they’re claiming. Or, if your client’s partner works and contributes to the household income, you could recommend enough cover to pay a regular outgoing or debt (like the mortgage or rent).

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Length of cover - Typically, you would look at protecting your client until retirement. Or, you could look at the policy ending in line with their mortgage (providing of course they’d still be able to cover their other monthly outgoings). The shorter the term, the cheaper the monthly premium.


Things to look out for

Definition of sickness

When getting a quote, it’s important to understand how sick your client has to be before the provider will pay out. This is called the ‘definition of sickness’. Wherever possible, you should choose a policy with the ‘own occupation’ definition as it offers your client the best chance of making a successful claim. Under the own occupation definition, the provider will pay your client if ANY illness or injury stops them from working. You should also check how long the definition is valid for (e.g. for the full claim and not just the first year).

State benefit deductions

If your client is sick and can’t work, they’ll expect the state sickness benefits they think they're entitled to. However, some providers will make deductions to the benefit they pay if your client does receive state help, so this is something else you should look out for.

Standard exclusions

A number of providers have ‘standard’ exclusions, meaning they won’t pay a claim if it’s related to a specific condition. For example, some won't pay a claim if it’s related to HIV or Aids. This is something you should check to ensure there are no nasty surprises for you or your client at claim.

Keeping up with the cost of living

Income protection offers long-term financial security, so it makes sense to protect your client’s benefit against the risk of inflation. This is called the ‘indexation’ option. When comparing products, check what approach the provider uses and make sure it’s fair and transparent. Some insurers simply increase how much your client pays and their benefit by the Retail Prices Index. Others increase the price at a higher rate, leading to steeper premiums in the future.

It's worth remembering if a client chooses level cover, the amount they'd get at claim is fixed and won't change in the future. It also means their benefit will buy them less in the future.

Top tips

  • Go through your client’s contract of employment to find out what sick pay they’re entitled to. You can then choose a waiting period based on when they stop receiving employer sick pay.
  • Many providers have budget planners you can use with clients to show them how much they spend every month. Many people seriously underestimate their outgoings, so getting the figures down on paper can be a really effective way of showing clients what’s at risk.

View our interactive budget planner

0800 678 1890

TextDirect: first dial 18001

8.30am - 6.30pm Monday - Friday

We may record and/or monitor calls for training and audit purposes.

Watch our Income Protection video

Income Protection enhancements video thumbnail

Watch our short video that summarises the exciting changes we've made to our Income Protection product.


Literature

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Flexible Protection Plan

Why not add Life cover or Critical Illness to your client's plan for a wider protection portfolio?

More about Flexible Protection Plan

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Tools and Calculators

Everything you need to support your Income Protection recommendations.

Income Protection tools and support

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Personal Sick Pay

Income protection for clients in riskier jobs who can be more expensive to insure.

More on Personal Sick Pay

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Large Case Team

If your client wants cover for more than £5,000 a month, we can offer dedicated support.

More about our Large Case Team

FOR UK FINANCIAL ADVISERS ONLY
LV=, County Gates, Bournemouth, BH1 2NF, UK