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What Is Income Protection and Do You Need It?
Income protection pays a monthly income if illness or injury stops you working. Find out how it works, who it suits and what affects the cost.
Wondering what income protection is and whether you need it? In short, it pays you a regular monthly income if illness or injury stops you working, helping you cover the bills while you recover.
What is income protection?
Income protection is a type of insurance that replaces part of your income if you can't work because of sickness or injury. Payments usually continue until you return to work, the policy ends, or you reach retirement age, depending on the cover you choose.
It is different from critical illness cover, which pays a one-off lump sum if you're diagnosed with a specific serious condition.
Who should consider it?
Income protection is worth looking at if you rely on your earnings to pay your mortgage, rent or household bills. It's especially relevant for:
Self-employed people, who often have no employer sick pay to fall back on
Families with one main earner
Homeowners with a mortgage to protect
Company directors, who may want an executive income protection plan through their business
Good to know: many policies have a "deferred period", the wait before payments start. A longer wait usually means a lower premium.
How does the cost compare?
Your premium depends on your age, health, occupation and how much cover you want. These are the main factors:
Factor | Effect on price |
|---|---|
Longer deferred period | Usually cheaper |
Higher monthly benefit | Usually more expensive |
Higher-risk occupation | Usually more expensive |
Fixed vs. reviewable premiums | Fixed premiums cost more at the start but won't rise |
How to choose the right cover
Work out your essential monthly outgoings.
Check what sick pay you'd get from your employer, and for how long.
Pick a deferred period that matches your savings and sick pay.
Compare policies from several insurers, including what they exclude.
Frequently asked questions
Will income protection pay out if I'm made redundant?
No. Income protection is designed for when you can't work because of illness or injury, not for job loss.
Can I get cover if I have a health condition?
Often yes, though an insurer may adjust the terms or price. An adviser can help find insurers that suit your circumstances.
Is income protection taxable?
It depends on how the policy is set up. Payments from policies you pay for personally are generally tax-free, but check the current rules on gov.uk.
Next steps
If you'd like help working out how much cover suits you, our advisers can explain your options in plain English. You can get a free quote or contact us to talk it through, with no obligation.
