Term Life vs Income Protection Insurance Comparison | Compare Premiums for the Same Coverage
Enter your current age, insurance period, and desired coverage amount to compare premiums between level term life insurance and income protection (decreasing term) insurance for free.
When preparing the same "amount you want covered in case of the worst," premiums differ between term life insurance (coverage stays level throughout the policy period) and income protection insurance (the remaining payout decreases as the policy period passes). If you are not yet sure how much coverage you need, first try the Necessary Life Insurance Coverage Calculator, then come back here to compare premiums between the two insurance types.
How Term Life and Income Protection Insurance Differ
| Coverage amount for term life insurance | Stays level throughout the policy period |
|---|---|
| Coverage amount for income protection insurance | Decreases as the policy period passes (paid out as a fixed monthly amount, like an annuity) |
| This tool's estimation model | Premiums are estimated as roughly proportional to the average remaining coverage over the policy period. Since income protection insurance has about half the average coverage of term life, its premium tends to be lower — a tendency this model reproduces. |
Actual premiums vary by insurer, product design, gender, and health condition (rate class), so treat this as a simplified estimate to grasp the relative difference between the two insurance types.
Simulate Premiums from Age, Policy Period, and Necessary Coverage
How term life and income protection differ
When arranging death cover, the first question most people face is whether to choose term life insurance or income protection insurance. Both are pure protection products: they build no savings, which is precisely why the premiums stay low. The difference lies in the shape of the cover. Term life pays a fixed sum throughout the policy period, whereas income protection pays a set amount each month like a pension, so the total still payable shrinks as the years pass.
Enter the age at which you would take out the policy, the cover period and the sum you want available, and this tool compares the premium levels of the two. It uses a simplified model in which the premium is roughly proportional to the average remaining cover across the policy period. Because income protection averages out at about half the cover of an equivalent term policy, its premium tends to be lower — which is what actually happens in the market. Real premiums vary with the insurer, your sex and your state of health, so treat this as groundwork for deciding which shape of cover suits your needs, rather than as a quotation.
Reference figures used in this calculation
The figures below are not set by law. They are reference values used as a guide, and the actual amounts differ from provider to provider.
- Rule-of-thumb figures used in life-insurance needs analysis and structured-settlement buyouts — Industry convention (a guide based on insurers' own product descriptions) （No unified official dataset exists） Last checked 2026-10-17
How to compare the two premiums
- Enter the age at which you would take out the policy Premiums change substantially with entry age, so enter the age you are actually considering.
- Set the cover period Enter, in years, the span over which you need protection — until your youngest child is independent, or until retirement, for instance.
- Enter the cover you want to arrange If you do not yet know how much cover you need, working it out first with the life insurance needs calculator and then returning here gives a sharper answer.
- Compare the two premiums You see the gap in premium for arranging the same cover. How you judge that gap is where the real decision begins.
Tips for getting more out of it
- Income protection insurance tends to have a lower premium for the same coverage amount because the coverage decreases over time. It tends to suit households whose necessary coverage also decreases over time.
- Term life insurance keeps the coverage level regardless of when death occurs, making it suitable for situations requiring a lump sum, such as paying off a remaining mortgage balance.
- If you don't know your necessary coverage amount, first estimate it with the Necessary Life Insurance Coverage Calculator, then come back here to compare premiums.
- Setting a shorter policy period tends to lower the average age and the premium, but setting it shorter than the period you actually need coverage for leaves you uninsured after the policy ends.
Where this helps
Reviewing cover after a child is born
If you want heavier protection only until your children are independent, this shows how well income protection — whose required sum falls over time — fits that need.
Thinking about top-up cover after taking a mortgage
Mortgage life cover clears the loan balance, so this helps you decide which shape suits the living costs that remain.
Keeping the premium burden down
Seeing in figures that the same cover can cost different amounts makes it easier to reconcile protection with the monthly household budget.
Sanity-checking a sales proposal
You can verify for yourself whether the premium and the shape of cover you have been offered are reasonable against your own needs.
Insurance comparison terms
- Term life insurance
- Cover for a defined period that pays a fixed sum if death occurs within it. The amount of cover does not change during the term.
- Income protection insurance
- Cover that pays a set amount each month, pension-style, from the time of death until the end of the policy period. The total still payable falls as time passes.
- Required cover
- The sum needed to support dependants should the worst happen, after subtracting survivor pensions, savings and other income.
- Pure protection
- A policy with no maturity value and little or no surrender value. Dispensing with those keeps the premium down.
- Decreasing cover
- Cover that tapers gradually as time passes. The total still payable under income protection takes this shape.
- Average remaining cover
- How much cover remains on average across the whole policy period. This tool makes the premium proportional to that figure.
Frequently Asked Questions
Side Note — Why Is Income Protection Insurance Cheaper Than Term Life?
Income protection insurance is a relatively new type of death benefit that appeared in the Japanese insurance market in the late 1990s. Term life insurance, which had long been the mainstream product, was valued for its simplicity — "the same coverage amount throughout the policy period" — but in most real households, the coverage actually needed gradually decreases as children grow up. Income protection insurance aligns the shape of the policy with this reality of decreasing need, allowing the premium to be lower for the same initial coverage amount.
The mechanism behind the lower premium is simple. The risk an insurer bears is proportional to the average amount it might have to pay out. Term life insurance carries the risk of paying the full amount all the way to the last day of the policy period, while income protection insurance sees the remaining total payout shrink as years pass, so the insurer's average risk is smaller than with term life. This difference in average risk shows up directly as a difference in premium.
That said, income protection insurance has a caveat. If death occurs early in the policy, the payout is comparable to term life, but the closer it occurs to the end of the policy period, the smaller the total payout becomes. The fact that "even though the coverage amount looks the same, the amount actually received depends on timing" is a point that is easy to overlook when comparing insurance products.