What Is Income Protection Insurance?
Income protection insurance pays a monthly benefit, typically 50–70% of your gross income, if you are unable to work due to illness or injury. It is not tied to a specific list of conditions (unlike critical illness cover). If any illness or injury prevents you from doing your job, the policy can pay out, and it continues paying until you recover, reach your selected retirement age, or the policy term ends.
The Honest Case For and Against
The case for income protection
- Statutory Sick Pay is only £116.75 per week, far below most people's actual expenses
- Employer sick pay typically ends after 3–6 months even in generous schemes
- Serious illness can last months or years, cancer treatment, back injuries, mental health conditions are the most common long-term absence causes
- Most people could not manage financially for 12 months without income, savings run out quickly when mortgage, rent, and living costs continue
- The self-employed have no sick pay safety net at all from day one
The case against (and honest responses)
'It's expensive.' Long-term own occupation cover is more expensive than basic protection products, but premiums can be structured using a longer deferred period to bring costs down significantly. A 52-week deferred period can halve the premium compared to a 4-week wait.
'I have savings.' For shorter absences, savings may be sufficient. But income protection is not designed for two-week illnesses, it is for the scenario where you cannot work for 6 months, 18 months, or longer. At that point, most people's savings are exhausted.
'I have sick pay at work.' Many employer sick pay schemes are more limited than people realise. Check your contract: how many months of full pay, how many months of half pay, and what happens after that? Income protection can be structured to begin exactly when employer sick pay ends.
What Does It Actually Cost?
A rough benchmark: a 35-year-old non-smoker in a non-manual occupation, seeking £2,000 per month benefit with a 13-week deferred period, might pay £40–£70 per month for long-term own occupation cover. Shorter deferred periods cost more; longer deferred periods cost less. The premium also depends on occupation risk and health.
Is Short-Term or Long-Term Cover Better?
Short-term income protection (paying for 1–2 years per claim) is significantly cheaper. For some people, particularly those with strong employer sick pay and reasonable savings, short-term cover bridging the gap after employer sick pay ends is a practical and affordable compromise.
Long-term cover is more comprehensive, it provides protection for years-long absences, but costs more. The right answer depends on your individual financial resilience, existing sick pay entitlements, and budget.
Frequently Asked Questions
Does income protection cover stress and mental health conditions?
Yes, income protection covers inability to work due to any illness or injury, including stress, anxiety, depression, and burnout, provided you meet the policy's incapacity definition. This is a significant advantage over critical illness cover, which generally does not include mental health conditions. Mental health is now one of the most common reasons for long-term work absence in the UK.
Can I claim income protection if I work part-time on return?
Many income protection policies include a rehabilitation or partial incapacity benefit. If you return to work in a reduced capacity, fewer hours or a lower-paid role, the policy may top up the difference between your reduced income and your pre-illness income. Check whether this feature is included when comparing policies.
Tanweer Hussain is the editor at TopQuote, an independent life insurance broker and appointed representative of The Openwork Partnership with over 20 years of experience. He oversees the accuracy of all published content, including the factual and regulatory detail that matters most on claims-related topics. All content on this page has been reviewed for FCA compliance.