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Income protection insurance

Keep money coming in when you need it most

  • Offers a replacement income if you’re unable to work through illness or injury
  • Covers physical conditions and mental health
  • Plus, enjoy fantastic rewards, on us[1]

What is income protection insurance?

Income protection insurance offers a replacement income if you’re unable to work due to illness or injury. It could help you pay essential household bills like your mortgage, utilities and food while you focus on your recovery.

Only around 6% of people in the UK have an income protection policy, according to the Financial Conduct Authority’s latest Financial Lives Survey.

But if you’re worried about what might happen if you become ill or lose your job, income protection insurance could offer you and your family security.

What do I need to get a quote?

Once you’ve chosen the type of income protection cover you want, you’ll need to give us the following information:

  • Your name, age and address
  • The type of job you do
  • Whether you’re employed or self-employed
  • Your annual income before tax
  • The deferred period you choose – this is the length of time you agree to wait before payouts begin
  • The amount of cover you want, based on your monthly income.
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Do I need income protection insurance?

If you or others rely on your income to cover regular household bills, an income protection policy can ensure your lifestyle remains unaffected if you were ever unable to work. Even if you have a pot of savings built up, you could quickly burn through it without a regular salary coming in, leaving you without anything for another potential emergency.

If you’re self-employed or you’re employed but only have statutory sick pay (SSP) to fall back on, income protection could offer a vital safety net.

But you may not need income protection if:

  • You already have income protection insurance as part of your work benefits
  • You have some form of illness cover through another insurance policy or even with your mortgage.

If you’re not sure whether income protection is right for you, talk to an independent financial adviser. They can offer expert advice and take you through your options.

How much is income protection insurance?

The cost of income protection insurance can vary quite significantly due to a few different factors, including:

  • Your age – the older you are when you take out the policy, the more you’re likely to pay. That’s because there’s a greater risk of you falling ill and needing to make a claim.
  • Your job – the riskier your job is considered, the higher your premiums will be. Builders and mechanics are likely to pay more than accountants and office workers, for example.
  • The length of cover – short-term policies are cheaper than long-term ones.
  • Your lifestyle – if you smoke or have pre-existing health conditions, you may be more vulnerable to severe illness that might force you off work, meaning you’ll be more likely to make a claim.
  • The deferred period – the longer you can wait before you start to receive your replacement income, the cheaper your premium is likely to be.
  • Your ability to do alternative work – income protection will cost more if you want to be covered for not being able to do your current role specifically, rather than not being able to work in other roles.

What does income protection insurance cover?

Income protection policies typically cover most illnesses and injuries that leave you unable to work. These include: 

  • Musculoskeletal problems like back pain or broken bones. Back and neck pain were the biggest causes of income protection claims in 2022, according to the Association of British Insurers (ABI).
  • Mental health conditions, including depression, stress and anxiety.
  • Serious illnesses such cancer, heart disease and stroke.

While these are common reasons for claiming, you’ll only receive a payout if you meet your provider’s specific criteria for being unable to work. This is often referred to as ‘definition of incapacity’.

Income protection usually pays out until you return to work, retire, die or the policy ends, whichever is sooner. You can claim as many times as you need to while the policy lasts.

What isn’t covered by income protection insurance?

Your income protection policy may exclude certain types of illness or injury, for example, self-harm. What’s more, you might not be covered for certain pre-existing medical conditions and illnesses that run in the family, or you may be asked to pay more for your premium, but your provider should be clear about this. 

Some policies also state that you can’t make a claim if your illness or injury doesn’t prevent you from doing other types of work, even if you have to give up your current job.

Income protection insurance only covers you if you’re unable to work for a medical reason. You won’t be able to make a claim if you resign, retire or are made redundant. If job loss is something you’re concerned about, you might be better off with an accident, sickness and unemployment policy.

Author image Tim Knighton

What our expert says...

“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 payout.”

- Tim Knighton, Insurance expert

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How much will I get from income protection insurance?

Income protection usually only covers a percentage of what you earned before you were unable to work – typically around 50% to 70% of your gross monthly income. This is because the income you get from the policy is tax-free.

When taking out a policy, you’ll usually have the option to link your income protection to a measure of inflation such as the Retail Prices Index (RPI). This helps to ensure any future payout you receive will keep in line with cost-of-living rises. But your premiums may also go up if you choose this option.

Compare income protection

It’s easy to compare prices and different levels of cover with Compare the Market. Just use our income protection insurance comparison service and fill in your details and what cover you’re interested in. We’ve partnered with Howden and it only takes a few minutes to see what quotes could be available to you.

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Car Finance 247 Limited acts as a credit broker, not a lender. To apply you must be a UK resident and aged over 18 or over. Credit is subject to status and eligibility.

The content written in this article is for information purposes only and should not be taken as financial advice. If you require support on the products discussed here, please speak to your bank/lender or seek the advice of an independent professional financial advisor. We also have more information on our Customer Support Hub.

Frequently asked questions

What is group income protection?

Group income protection is a policy offered by some employers to their staff. It usually forms part of an employee’s benefits package, and often includes rehabilitation services and wellness support to help those off sick return to work.  

The employer pays for the insurance and receives the payout if a successful claim is made. This is then passed on to the employee via the PAYE system instead of being a tax-free payout. 

 

What is the difference between life insurance and income protection?

In a nutshell, life insurance is for when you die, while income protection is for when you can’t work. 

Life insurance pays out a lump sum if you die during the policy term, providing financial support to your family so they can still pay the bills after you’re gone. Income protection gives you a monthly pay-out if you can’t work because of illness or injury.

 

Do I need income protection if I have critical illness cover?

Critical illness insurance could pay out a lump sum if you’re diagnosed with a serious illness specified on your policy. But it does have some limitations. 

An income protection policy generally offers a broader definition of illness and injury. If you’re off work with a bad back or depression, for example, you might find that these conditions aren’t covered by critical illness insurance.

Page last reviewed on 19 APRIL 2024
by Tim Knighton