Income Protection Insurance UK:
Your Salary Safety Net
What Happens to Your Income If You Can't Work?
Here's a question most people never think about: if illness or injury stopped you working tomorrow, how long could you survive financially? A week? A month? If the honest answer makes you uncomfortable, income protection insurance might be one of the smartest things you ever buy.
Unlike life insurance, which pays out when you die, income protection pays out while you're still very much alive but unable to work. It replaces a portion of your salary, typically 50-70%, paid monthly, for as long as you need it.
Do You Need Income Protection?
Ask yourself:
Do you have a mortgage or rent to pay?
Do you have dependents relying on your income?
Could you survive on Statutory Sick Pay alone (currently £123.25 per week)?
Does your employer's sick pay run out after a few months?
If any of those hit home, read on.
How Income Protection Works
You choose a monthly benefit amount (usually up to 70% of your gross salary), a deferred period (how long you wait before payments begin, typically 4, 8, 13, or 26 weeks), and a payment term (to a fixed age, or until you recover). The longer your deferred period, the lower your premiums, so if your employer pays sick pay for three months, a 13-week deferred period makes sense.
Once your claim is accepted, payments continue until you return to work, the policy term ends, or you reach retirement age, whichever comes first. You don't have to be permanently disabled to claim; a serious illness or injury that keeps you out of work for months qualifies.
What Does It Cover?
Most income protection policies cover inability to work due to:
Serious illness (cancer, heart attack, stroke)
Mental health conditions (increasingly common and increasingly covered)
Musculoskeletal problems (back injuries are one of the leading causes of claims)
Accidents and injuries
Always check the policy definition of "unable to work." The best policies use an "own occupation" definition, meaning you can claim if you can't do your job, not just any job.
What Affects the Cost?
Your occupation - a desk worker pays less than a manual labourer
Your age and health - younger and healthier means cheaper
Your deferred period - longer wait, lower premium
The benefit amount - higher monthly payout means higher cost
The payment term - to retirement age costs more than a fixed 2 or 5 years
Income Protection vs Critical Illness Cover
These are often confused. Critical illness cover pays a one-off lump sum on diagnosis of specific conditions. Income protection pays a monthly income for as long as you can't work, regardless of the condition, making it broader and, for many people, more valuable.
Getting Covered
Use a broker. This is a product where professional guidance genuinely earns its keep, especially if you have any health conditions. You can find a regulated adviser at Unbiased.
Frequently Asked Questions
Is income protection pay taxable?
If you pay for the policy yourself, the monthly benefit is tax-free. If your employer pays the premiums as part of a group scheme, the payout is usually taxed as income, so check which type you have before relying on a figure.
Does income protection cover redundancy?
No, standard income protection only pays out for illness or injury that stops you working, not job loss. If you want redundancy cover too, you need a separate accident, sickness and unemployment (ASU) policy, which is a different product entirely.
Can self-employed people get income protection?
Yes, and arguably it matters more if you're self-employed, since you have no employer sick pay to fall back on. Insurers will usually base your cover on your average earnings over the past two to three years, so keep your accounts in good order when applying.
How long does income protection pay out for?
For as long as you're unable to work, up to the end of your chosen policy term, which could be a fixed number of years or all the way to retirement age. This is the key difference from critical illness cover, which pays once and stops.
What's an "own occupation" policy and why does it matter?
It means you can claim if you can't do your specific job, not just any job. A surgeon who loses fine motor control couldn't perform surgery but might still be fit for other work; an "own occupation" policy would still pay out, while a cheaper "any occupation" policy might not.
Can I get income protection with a pre-existing mental health condition?
It's possible but often comes with exclusions for that specific condition rather than a straight decline. A broker who knows which insurers take a more flexible view of mental health history is worth using here, since approaches vary a lot between providers.
"The time to repair the roof is when the sun is shining."
John F. Kennedy
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