Income Protection Insurance

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Due to the coronavirus outbreak, at the moment we’re unable to offer comparison for Unemployment cover, as currently all insurance providers are unable to offer policies. However, we’re still able to offer comparison for Accident and Sickness cover. To help answer any questions you might have, we’ve put together the latest information on coronavirus and income protection.

What is income protection insurance?

Income protection insurance is a type of cover that offers a replacement income if you’re unable to work, usually due to illness or injury. There are several types of income protection insurance, offering short and long-term cover.

Worried about what might happen if you become ill or lose your job? Income protection insurance could offer you and your family security. This is our guide on what you need to know.

What types of income protection are there? 

There are several types of income protection policy: 

Permanent Health Insurance (PHI) – not to be confused with private health insurance that covers medical costs. PHI means you can protect a portion of your income – often 50% of your gross salary – in the event of illness or an accident that means you’re unable to work. It can pay out until you reach retirement age, providing you with greater financial security.
Find out more about Permanent Health Insurance.
Accident and sickness cover (critical illness cover) – if you find yourself unable to work, through serious sickness or injury, this cover provides an alternative income for you to pay your monthly outgoings until you can return to work. Policies usually pay out for one or two years.
See more information about sickness and injury cover

Unemployment cover – should you lose your job, this provides you with a steady replacement income. After a deferred period upon leaving work (which can be adjusted in your policy), you’ll begin to receive a tax-free monthly income to replace your lost earnings.
Find further details about Unemployment Insurance
Accident, Sickness and Unemployment (ASU) cover – a combination of the above, in the event of illness, an accident or job loss, this allows you to protect the payments on your mortgage or rent, plus any other debts. You can also access some extra income. 
Get more information about ASU.

Short term or long-term income protection?

Depending on your needs, you may choose either short term or long-term income protection cover.

Short-term income protection

Short-term income protection typically covers any lost earnings through illness or injury that leaves you unable to work. It can also cover unemployment, so that, in the event of redundancy for example, your earnings are replaced with an alternative income until you’re back in work. This type of cover typically lasts for one or two years. Unemployment insurance would be classed as short-term income protection, as it normally pays out for no longer than two years.

Long-term income protection

Long-term income protection is better suited for more serious circumstances, which leave you unable to work for a much longer period, usually owing to sickness or injury. Long-term protection tends to start from five years of cover and can cover you all the way to retirement age. Permanent Health Insurance is an example of long-term income protection, as it can support you until retirement.

Find out more about both types of cover.

Kamran Altaf

From the Life team

“It’s vital that you’re honest about your medical history and give your insurance provider the information they ask for. It could be the difference between a successful claim or no pay out.”

Do you need income protection insurance?

Sickness, injury and redundancy are just a few of the things that can suddenly impact your income. It’s not a nice thing to think about but it is important, especially if you have a family or additional financial commitments.

These circumstances can quickly burn through any savings you’ve managed to build, with everything from your mortgage/rent, utilities, food and travel to consider.

Income protection insurance gives you the security and peace of mind so that, should something happen, your monthly outgoings are covered.

Frequently asked questions

How has the coronavirus pandemic affected income protection policies?

If you took out income protection insurance before the COVID-19 pandemic began, you should still be covered if you’re made unemployed or are seriously ill from coronavirus. However, you should check your policy wording, in case there are any listed exclusions. In most cases of COVID-19 though, illness is mild and you probably won’t need to rely on income protection insurance. You should be fine to take standard sick leave.

In terms of getting a new income protection insurance policy, we’re currently unable to offer comparison for unemployment cover, as some insurance providers aren’t offering policies. If you’re looking for accident and sickness cover, you should be able to find cover.

What’s the difference between permanent health insurance (PHI) and accident sickness and unemployment cover (ASU)?

There are a few differences:


  • will cover you until retirement age
  • can be arranged to start when your employee sick pay stops
  • only covers you for accident or illness
  • may require a medical – depending on your health history.


  • covers you for a maximum or 12 or 24 monthly payments
  • usually has a 30-day deferment period (the length of time you have to wait before payouts begin)
  • can include redundancy cover (in addition to accident or illness) although you often wait 90 days before you start receiving money
  • involves fewer health and lifestyle questions.

How much does income protection cost?

This really depends on your personal situation. There are many things that will affect the cost of your income protection insurance. Here are some examples:

  • Salary – simply put, the more you earn, the more you’re looking to cover, which means the protection will cost more
  • Job – the type of job you have may have an impact, as some jobs are classed as a higher risk
  • Monthly outgoings – if you’ve got a mortgage to pay or other expensive bills, this will mean you’ll need more cover to pay your existing bills if you’re unable to work
  • Debts – if you have outstanding loans, credit or other debts, you’ll need enough cover to pay these costs too
  • Marital status – if you have a spouse, civil partner and/or a family, you could have people who are financially dependent on you, meaning you need more cover
  • Age – the older you are the more likely you are to become ill or injured, meaning you’re a higher risk to your insurance provider.
  • Health – if you have pre-existing health conditions, you may be more vulnerable to severe illness which may force you out of work, meaning you’ll be more likely to make a claim
  • Lifestyle – if you’re active, fit and healthy, this can be helpful, but if you practice extreme or adventure sports, you’re more likely to be injured and need to make a claim.

Can I have more than one income protection policy?

Yes you can. Because the policies are designed to help over different time periods and in different situations, having a combination of policies will offer the greatest protection – but you will be paying multiple premiums. For example, you may want an ASU to protect you for redundancy and a PHI policy to cover you if illness or accident stops you working.

Remember too, every policy has a minimum claim period of 30 days. This means that if you’re not off work for a full 30 days, you can’t make a claim. Policies may also have an excess period. This is the time after you’ve been signed off work or become redundant that you won’t be covered for.

In some cases, the excess period will be nil, meaning you can claim back to day 1 providing you’ve been off for the minimum claim period. But the whole of the minimum claim period has to elapse before you can be paid out. This is the same for accident and sickness only, unemployment only and ASU policies.

If you’re employed, you want to take into account any benefits offered by your employer, such as sickness benefits, when deciding on how much cover you need and what the excess should be.

If you’re self-employed, you’ll need to consider how long you can afford to wait before your policy kicks in when selecting your policy and excess period.

You might also consider combining a sickness policy with a short excess period, and a PHI policy with a much longer excess, to maximise the period that you could potentially receive a payout for.

It’s also important to remember the maximum limits, which may be 50%-70% of your monthly salary, no matter how many policies you have.

Will having income protection insurance affect my sick pay?

Not at all. The idea is that the insurance takes over when your sick pay ends. If you fall ill, some employers will still pay your salary for a set period – sometimes for up to 12 months. Check how much your employer will give you and for how long.

The longer you receive a salary, the longer you can make your deferment period. Many policies won’t pay out if you’re still receiving a salary.

Can I get income protection if I’m self-employed?

If you’re self-employed, you won’t have traditional employee benefits, so income protection is something you should consider.

Unlike an employee, if you’re a sole trader you won’t be entitled to sick pay or redundancy pay. Income protection can give you the peace of mind that you’re financially protected if you’re unable to work.

Find out more about self-employed income protection.

How much of my income will it cover?

Income protection usually only covers part of what you earned before you were unable to work; typically, around 50 to 60% of your gross monthly income.

Does it pay out if I lose my job?

If you have short-term income protection, unemployment insurance or a bundled ASU policy, you should receive a pay-out if you lose your job.

However, you won’t be able to claim if you buy a policy after your redundancy has already been announced. It’s also very unlikely you’ll receive a pay out if you take out voluntary redundancy.

Check the terms and conditions before you buy to make sure you’d qualify for unemployment protection.

What is an exclusion or excess period in redundancy cover?

All unemployment policies have an unemployment initial exclusion period. This is a 90 to 120 day period, depending on the insurance provider, in which the customer is unable to make a claim. This is to safeguard the provider against people taking out a policy when they’re already aware they’ll be made redundant in the near future.

Does income protection insurance pay out if I die?

No. If you die, your income protection insurance will no longer be valid. If you have dependents who rely on your income, you may also want to consider taking out life insurance. This will give your family financial protection in the event of your death.

Who doesn’t need income protection?

Not everyone needs income protection. It depends on your personal and financial situation. Here are some examples of people who might not need income protection:

  • You’re not the main breadwinner in your home – if you’re lucky enough to live with someone else who has a secure enough job and salary to support the both of you, you might decide to only get income protection for their salary.
  • You can get by on your company’s sick pay – if you work somewhere that offers a good benefits package, you might decide that that offers enough to protect you against a period that you’re unable to work.
  • You’ve got enough saved away – if you’ve been carefully saving over a long time, you might decide that you have enough to fall back on, if you face time out of work. If that’s the case, you could just save and bank the premiums you’d otherwise be paying.

How can I compare income protection policies?

It’s easy to compare prices and the different levels of cover with Compare the Market. Just use our income protection comparison service and fill in your details and what cover you’re interested in. It only takes a few minutes to see what quotes are available to you. The insurance market is very competitive, so it’s a good idea to compare policies and prices to get the right cover at the right price.

Make sure you check the details of the policy, not just the price, as they will all offer slightly different cover.

What alternatives are there to income protection insurance?

The income protection cover that we offer isn’t the only option available to you. Here are a couple of alternatives to consider:

  • Mortgage Payment Protection – if you suddenly become unemployed, or are off work through sickness or injury, mortgage payment protection could cover the cost of your monthly mortgage payments.
  • Redundancy Protection – similar to unemployment cover, redundancy protection is a form of insurance that helps you to cover your monthly outgoings if you’re made redundant.

What do I need to get a quote?

Once you’ve chosen the type of income protection cover you want, we’ll ask you to answer a few questions about:

  • your name, age and address
  • the type of job you do
  • whether you’re employed or self-employed
  • if you smoke or use nicotine-based products
  • the deferred period you choose
  • your health
  • the amount of cover you want, based on your monthly income

Once you’ve decided on a quote you’re happy with, just follow the link that will take you to the provider’s website.

Why use Compare the Market?

2 minutes to get a quote**

93.8% of users would recommend Compare the Market to friends or family***

**On average it can take less than 2 minutes to complete an income protection ASU quote through Compare the Market based on data in November 2020.

***For the period 1st September to 30th November 2020, 12,477 people responded to the recommend question. 11,706 responded with a score of 6 or above, therefore 93.8% are likely to recommend.