Income protection calculator

How the calculator works

Income protection pays you a monthly sum if illness or injury stops you working. It starts after a waiting time you choose, called the deferred period, and carries on until you go back to work or the policy ends. So there are two questions to answer: how much you need each month, and how long you could manage before the payments begin.

The monthly figure is your essential outgoings less any income that would carry on without you working. For employees, Statutory Sick Pay comes next. It's £123.25 a week or 80% of your normal weekly earnings, whichever is lower¹, and it's paid for up to 28 weeks². If your employer pays full salary for a while, that comes first. Your savings then cover the gap between SSP and what you need, and once SSP stops, the whole amount.

With the example figures you're employed on £35,000 a year with £1,600 of essential monthly outgoings. SSP is £123.25 a week, because 80% of your weekly pay (£538) is higher. That's £534 a month, leaving a gap of £1,066. Your employer pays in full for 1 month, then SSP runs for about 5.5 more months. Your £4,000 of savings covers the £1,066 gap for 3.8 months. In total you could manage for about 20 weeks, so 13 weeks is the longest standard deferred period that fits.

The last part of the result is the insurer limit. Take Aviva's Income Protection+: it covers 65% of the first £60,000 of gross earnings and 45% above that⁷. On £35,000, that's £22,750 a year, or £1,896 a month, which is more than the £1,600 you need.

Choosing a deferred period

Long-term policies usually let you choose a wait of 4, 8, 13, 26 or 52 weeks³⁴⁵⁶. The longer the wait, the lower the premium, because fewer claims last that long. But you pay your own way until it ends.

• Match it to your sick pay. If your employer pays full salary for 6 months, a 26-week wait means the policy starts about when that pay stops.
• Count only the savings you'd spend on bills. Money set aside for a new boiler or car repairs may be gone by the time you need it.
• Don't lean on SSP. At £123.25 a week it comes to £534 a month at most, which pays only part of the bills for most people.

Split deferred periods

Some insurers let you split your cover into two parts with different waits. You might insure the gap on SSP from an early point, then add a second amount from 26 weeks, which is when SSP is close to running out. With the example figures, that would be £1,066 a month after 13 weeks and a further £534 a month after 26 weeks. The calculator shows a split like this when it fits your figures. Whether you can do it, and how the two parts are priced, depends on the insurer.

Own occupation and other definitions

A policy pays only if you meet its definition of being unable to work. This matters as much as the monthly amount.

• Own occupation: you claim if you can't do your own job. This is the most generous definition, and the one to ask for if your job needs particular skills or physical fitness.
• Suited occupation: you claim only if you can't do your own job or another job that suits your training and experience.
• Work tasks or activities of daily work: you claim if you can't carry out a set number of basic tasks, such as walking a set distance or lifting. It's a harder test to meet and is often the only option for riskier jobs.

Read the definition in the policy summary before you compare prices. A cheap policy with a strict definition may never pay out for the illness you're most likely to have.

Short-term or long-term cover

Long-term income protection can pay until you retire or the policy ends, however many claims you make. Short-term policies pay for a fixed time. Assurity, for example, pays for 6 or 12 months⁸, and National Assurance makes at most 12 monthly payments⁹. Short-term policies also cap the benefit lower, at £2,000 a month for Assurity¹⁰ and £3,000 for Best Insurance¹¹.

Short-term cover costs less and can suit you if a long illness is less of a worry than a spell of a few months. It won't help with a condition that keeps you off work for years, which is the case long-term cover is built for. Some long-term policies also offer a limited payment period, such as 2 or 5 years per claim, as a middle ground.

If you're self-employed

You don't get Statutory Sick Pay, and there's no employer paying you while you recover. The state help you might get is New Style Employment and Support Allowance, which depends on the National Insurance contributions you've paid in the last 2 to 3 years¹². It's a flat weekly amount and well below most people's earnings. Universal Credit may top this up, but it takes your partner's income and your savings into account.

That's why the calculator sets SSP to zero when you choose self-employed, and why your savings have to cover the whole shortfall from day 1. Insurers base your benefit on profit, not turnover. Shepherds Friendly, for example, uses average net profit over 3 years for the self-employed¹³. Have your recent tax returns to hand when you apply.

What affects the price

Your job comes first. Insurers group jobs by risk, so an office worker pays less than a builder or a nurse for the same cover. Age and health come next: premiums rise as you get older, and past back, joint or mental health problems can mean a higher price or an exclusion. Smokers pay more, as they do for life cover.

The rest is down to the choices you make:

• A 4-week deferred period costs much more than a 26-week one for the same benefit.
• Paying until retirement costs more than a limit of 1, 2 or 5 years per claim.
• Guaranteed premiums stay fixed. Reviewable ones can go up later, and age-costed ones start low and rise each year.
• A benefit that rises with inflation costs more, but it keeps its value over a long policy.