Income protection insurance is one of the most overlooked but vital forms of cover. While many people prioritise life insurance or car insurance, far fewer consider what might happen if you become too ill or injured to work. Yet for most of us, our ability to earn a living is our biggest financial asset.

If you lost your income tomorrow, how long could you manage your mortgage, bills, or childcare costs? If the answer is “not long,” then income protection insurance is well worth considering.

What is Income Protection Insurance?

Income protection is a monthly insurance payout that replaces a portion of your salary if you're unable to work due to illness or injury. It continues until:

You’re well enough to return to work
The policy term ends (e.g. the stated policy length or retirement age if a long term policy)
You die

It's sometimes referred to as permanent health insurance, and it’s not to be confused with critical illness cover, which pays a one-off lump sum for specific conditions.

Is State Support not enough?

In short—no, not for most people. In the UK you may qualify for:

Statutory Sick Pay (SSP) – £116.70 a week (as of 2025), paid by your employer for up to 28 weeks.
Employment and Support Allowance (ESA) – From £90.50 a week for over 25s after SSP ends.

Neither comes close to replacing a full-time salary. That’s where income protection steps in.

Types of Income Protection policy

When choosing a policy, there are three key factors that affect the cost and suitability of your cover: policy term, coverage amount, and deferred period.

1. Policy Term

Short-term policies pay out for a limited period—usually 1 to 5 years. These are cheaper, but may not offer long-term peace of mind if you develop a chronic condition.

Long-term policies pay out until retirement, death, or recovery. These cost more, but provide ongoing protection if you're permanently unable to work.

2. Coverage Percentage

Most policies pay 50–70% of your pre-tax income. Why not 100%?

Payouts are typically tax-free, and insurers want to avoid disincentivising recovery and return to work.

Top Tip: Work out your essential monthly expenses (mortgage, bills, food) and choose a coverage level that meets those costs—not necessarily your full salary.

3. Deferred Period

This is the waiting period between stopping work and when your payments begin. Typical options are: 4 weeks, 8 weeks, 13 weeks, 26 weeks, or 52 weeks.

Top Tip: The longer the deferred period, the cheaper the premium—but only choose one that you could realistically afford to wait. If your employer offers 3 months of sick pay, a 13-week deferral makes sense.

What to think about when choosing an Income Protection Policy

Here’s a practical checklist to help guide your decision:

✅ Do You Need It?

If you're self-employed, have little savings, or rely heavily on your income to pay bills, this cover is essential.

If your employer offers generous long-term sick pay, weigh up whether additional cover is necessary. Your employer might even offer you income protection as part of your contract - so its worth checking first!

✅ What Can You Afford?

Income protection isn’t cheap—especially long-term policies. If budget is tight, consider tweaking the following factors to make the policy cheaper:

A short-term policy
A longer deferred period
A lower payout percentage

✅ What's Covered?

Most policies cover you if you can’t do your own job (called “own occupation”).

Some cheaper policies only pay if you can’t do any job—harder to claim on, and less useful.

✅ Any Exclusions?

Check if the policy excludes pre-existing conditions, mental health, or back issues.

Pregnancy-related illness is another common exclusion—always read the small print.

Tips to Get the Best Value from Income Protection

1Buy while you’re healthy

Once you’ve developed a medical condition, it may be excluded from cover or increase the cost of your premiums. The best time to buy income protection is before you need it—ideally when you're young and healthy.

2Avoid short-term policies for long-term needs

Short-term income protection may save money now, but it could fall short if you’re off work long-term. Chronic conditions can last years—so think beyond a one- or two-year payout.

3Ask about guaranteed premiums

Guaranteed premiums stay the same over time. In contrast, reviewable premiums can rise unexpectedly, making them harder to budget for. If possible, go for guaranteed to lock in your costs.

4Use a specialist broker

Brokers like LifeSearch and Cavendish Online compare policies across insurers and can explain tricky terms and exclusions. They're especially helpful if you have health issues or non-standard work patterns.

5Check if you already have cover

Some employers or mortgage products include basic income protection. But these often have limited payouts or short cover periods—so check the details before deciding if you need a personal policy too.

Finding a policy

We can’t recommend specific insurance policies, but you we have listed some common brokers/ providers below to help you with your search:

Summary

Income protection insurance is about replacing your most important asset: your income. Unlike other types of insurance that protect physical items (like your house or car), this one protects your ability to pay for everything else in life.

Choosing the right policy comes down to balancing:

How long you want protection for (policy term)
How much you’d need to get by (coverage %)
How long you could survive without income (deferred period)

Like all insurance, it’s something you hope you never need—but you’ll be glad to have it if life throws you off track.

Income Protection