How can you reduce your income protection premiums?
As we get older some insurance premiums inevitably increase. We often have clients come in wanting to discuss how they can lower their income protection or considering dropping it completely, as what they are spending on premiums becomes a burden that doesn’t seem to match the cover.
Making sure our clients have sufficient insurance cover when they need it is hugely important to us, so before you drop the income protection here are some of our top tips for reducing your premiums.
Extend the stand-down period of your income protection. Most income protection policies start with a four week stand down before they pay out, however you can extend this period to eight weeks or 13 weeks. This can work well if you know you have a cash buffer to tide you over that period, and you can also have other plans in place such as taking a mortgage holiday until the cover kicks in.
Change the benefit period. Most income insurance policies pay the beneficiary until they reach age 65, however, this period can be reduced, with savings to be made. You can reduce the benefit period to five years or even two years – a Gen Re survey showed only 15% of income protection claims last over two years and only 4.1% of claims over five years. Some income protection policies include rehabilitation and the provider will actively work with you to get you back into work.
Reduce the benefit. This is not ideal as you want to keep decent cover for when you need it, But, depending on your personal circumstances, you may have enough of a buffer (or other funds you could access) in the event of a crisis that would make this a viable option. If you do choose to reduce the benefit, make sure you talk to an adviser first.
Focus on trauma cover. If you reduce your income protection you need to re-think your trauma cover. Trauma cover means you immediately have cash on-hand to deal with a crisis, which is especially beneficial if you have increased your stand-down period. The added benefit of trauma cover is that it can be used to cover the second income potentially lost in a crisis – that of a spouse who needs to look after the injured or ill party.
One last point to remember is that the scope of income protection is wider than that of trauma cover. Trauma cover only covers around 45 conditions, whereas income protection covers any injury or illness that causes you to be off work for longer than your waiting period and that meets the policies definition of disability.
Everyone’s circumstances are unique, which is why we always recommend talking to an adviser about your personal situation to find the best solution for you. Want to talk about your income protection? Contact one of our advisers today.