Income Protection Insurance
If illness or injury stopped you working tomorrow, how long could you genuinely keep paying your mortgage and bills? Income protection insurance replaces a meaningful portion of your income for as long as you’re unable to work, rather than paying a single lump sum.
What Income Protection Actually Is
Income protection insurance pays you a regular, tax-free monthly income if you’re unable to work due to illness or injury – genuinely different from our Critical Illness Cover page, which pays a single lump sum on diagnosis of a specific serious condition. Income protection instead replaces your ongoing earnings, month after month, for as long as you remain unable to work and your policy terms allow. Our piece on income protection vs critical illness cover covers this comparison in genuinely more depth, including a suggested priority order worth considering if budget forces a choice between the two.
How Much of Your Income You Can Actually Protect
Most UK insurers let you protect somewhere between 50% and 70% of your gross income, with some offering up to 80% for lower earners. Payments are typically tax-free, calculated based on your income immediately before you became unable to work.
The Deferred Period: Why Waiting Longer Means Paying Less
Every policy includes a deferred period – the length of time you need to be unable to work before payments actually begin, commonly 4, 8, 13, 26, or 52 weeks. The longer your chosen deferred period, the lower your monthly premium, since the insurer is taking on less risk. It’s worth setting your deferred period against any sick pay or savings you could genuinely rely on in the short term, rather than choosing the shortest, most expensive option by default.
How Long Payments Actually Continue
Most policies pay out until you’re able to return to work, reach retirement age, or your policy term ends, whichever happens first – genuinely different from critical illness cover’s single, one-off payment. Some shorter-term policies cap payments at a fixed period, commonly one to five years, which typically costs less than a policy paying right through to retirement.
You Can Claim Repeatedly, Not Just Once
Unlike critical illness cover, which is generally designed to pay out once before the policy ends, income protection can typically be claimed against multiple times over the life of the policy, provided each claim genuinely meets your policy’s definition of incapacity.
“Own Occupation” vs “Any Occupation” Cover
This distinction genuinely matters. An own occupation policy pays out if you can’t perform your specific job – a surgeon unable to operate due to a hand injury, for example, even if they could technically do other work. An any occupation policy only pays out if you’re unable to work in any capacity at all, a considerably higher bar to meet. Own occupation cover is generally preferred and more comprehensive, though it typically costs more as a result.
What Income Protection Doesn’t Cover
It’s worth understanding clearly that standard income protection doesn’t cover unemployment or redundancy – it only pays out for genuine illness or injury preventing you from working. If you specifically want cover for job loss too, this falls under a different product, commonly called Accident, Sickness and Unemployment insurance, worth discussing separately with your broker if that’s a genuine concern.
Self-Employed Applicants
Self-employed workers can access income protection, and arguably need it more than employed applicants, given the absence of employer sick pay to fall back on. You’ll typically need to evidence your income through tax returns or accounts, and premiums may be deductible as a genuine business expense – worth confirming this with your accountant.
If You’re Not Currently Working
If you’re a houseperson, unemployed, or working fewer than 16 hours a week, you can still apply for income protection, though claims are typically assessed against your ability to carry out everyday activities – walking, lifting, writing – rather than your ability to perform paid work, with a genuinely capped maximum monthly benefit reflecting this different basis of assessment.
Checking What Cover You Already Have
Some employers provide group income protection as a workplace benefit, and it’s worth checking exactly what this covers and for how long before arranging individual cover, since you may need less additional protection than you’d assume, or discover your employer cover is genuinely more limited than expected.
Working Out How Much Cover You Actually Need
A sensible starting point is your current take-home pay, minus any state benefits you’d be entitled to, minus work-related costs you’d no longer incur – commuting, for example – plus any additional costs illness might bring, such as extra heating or specialist equipment. It’s worth working through this properly with your broker rather than simply insuring your full salary by default.
What Affects Your Premium
Your age, health, occupation, chosen deferred period, and how long payments would continue all affect your premium, alongside whether you choose own occupation or any occupation cover. Typical UK premiums range from around £20 to £100 a month, though this varies considerably based on your specific circumstances and the level of cover you choose.
Why Comparing the Whole Market Matters
Different insurers apply genuinely different criteria and definitions of incapacity, and it’s worth comparing across the whole market rather than accepting a single insurer’s terms by default, particularly given how much the own occupation versus any occupation distinction can affect whether a future claim actually succeeds.
Frequently Asked Questions
How is income protection different from critical illness cover?
Income protection pays a regular monthly income for as long as you’re unable to work; critical illness cover pays a single lump sum on diagnosis of a specific serious condition.
How much of my income can I protect?
Typically 50-70% of your gross income, with some insurers offering up to 80% for lower earners.
Does income protection cover redundancy?
No – standard income protection only covers illness or injury; unemployment cover falls under a separate product.
What’s the difference between own occupation and any occupation cover?
Own occupation pays out if you can’t do your specific job; any occupation only pays out if you can’t work in any capacity at all, a considerably higher bar to meet.
Can self-employed people get income protection?
Yes, and arguably need it more than employed workers, given the lack of employer sick pay to fall back on.
Get in touch with details of your circumstances and income, and we’ll help you find cover genuinely suited to your situation.
