If you’ve ever wondered how much income protection cover you need, this calculator will help. It takes your income and outgoings into account, then calculates how much it would cost to cover yourself for the next 12 months.
Step 1: Your income
The first step income protection calculator is to determine your income. Your earnings can be from a job, self-employment or a pension. You will need to know the amount of each type of income before you can calculate how much cover you need.
If you’re employed full-time and earn an annual salary of £25,000 per year then this equates to £10 per hour (20 hours/week) or £40k gross annual salary (an average wage). If your employer pays holiday pay and pension contributions then these would also be included in their calculation if they are taken into account on an ongoing basis – so don’t forget about them!
Step 2: Your outgoings
The next step is to look at your monthly outgoings. This includes everything that you pay each month, such as:
- Mortgage or rent
- Utilities (electricity, gas and water)
- Food bills (groceries and other food expenses such as takeaway meals)
In addition to these basic items there may be further costs that you need to consider when calculating income protection. These may include insurance premiums and any fixed costs such as mortgage payments or maintenance of your home from time-to-time.
Step 3: Your savings
Now that you have a rough idea of how much income protection insurance is going to cost, it’s time to figure out how much money you should be saving. This will vary from person-to-person depending on their current financial situation, but there are some general guidelines:
- How much should I save for my income protection? This is likely the most important part of building a savings plan because it represents your entire future. The good news is that this calculation can be done very quickly using an online calculator like our handy tool below!
- How much do I need to cover my lifestyle expenses, such as groceries and clothing? These costs may fluctuate over time but they are typically fairly fixed (unless there are children involved). A reasonable goal would be 10%–20% of gross monthly income as a starting point; however if things get tight then reduce this amount accordingly until things start looking better again—which may mean cutting back even further than expected if necessary!
Step 4: Lifestyle expenses
The final step is to calculate your lifestyle expenses. These are any expenses that aren’t included in your step 2 outgoings, but are still considered to be necessary for you to live comfortably.
- Include items such as holidays, entertainment and eating out; for example:
- $1,000 per week on a family holiday
- $400 weekly for entertainment including cinema tickets, theatre tickets etc. (If you don’t have children this can also include babysitting)
- Include any debt repayments such as mortgage or rent (even if it isn’t monthly). Also include things like utilities if they’re recurring payments – like water/gas bills – even though they may not seem like an expense at the time but could help make life easier in future years when things might get harder due to old age or illness etc..
Use the calculator to determine how much cover you need.
The calculator will ask you to provide some details about your lifestyle, including:
- Your monthly outgoings (housing costs, food and drink etc.)
- Your savings (savings accounts and investments)
- Your income (salary/wage)
The calculator will then use these figures to calculate how much income protection insurance cover you need in order to be financially secure.
In conclusion, you may be wondering how much income protection cover you really need. We hope this guide has helped you get an idea of where to start and what the process looks like when calculating your own income protection insurance needs.