Income protection insurance

A safety net for your paycheque

Income protection insurance pays you a regular benefit if you cannot work due to illness or injury. It is designed to replace part of your wages so you can keep up with essential costs like rent or mortgage payments, utilities, food, and childcare while you focus on recovery. Unlike short sick notes or statutory sick pay, it can provide longer term support for as long as your policy allows.

In the UK, reliance on this cover is growing. Insurers paid around £204 million in individual income protection claims in 2024, with a claims payment rate close to 98%. Many claims last years, not weeks, reflecting conditions that take time to resolve. Musculoskeletal problems - such as back and neck pain - are a leading cause of claims, making up over a third of payouts. That matters because these are everyday issues that can affect almost anyone, not just manual workers.

Yet uptake remains low. Only about 14% of British adults hold income protection despite two thirds saying they would struggle financially if unable to work. Homeowners are particularly exposed - most with a mortgage do not have this cover even though illness is statistically more likely than death during working life. Misconceptions play a part too. Many people think income protection is far pricier than it is, when typical quotes for a healthy mid-30s non-smoker can start nearer the mid-£30s per month.

This guide explains how the cover works, where the limits are, and how to choose an option that fits your budget and risk. No jargon, no pressure - just clear points so you can make a confident, informed decision.

A reliable income bridge can turn a health setback into a manageable pause, not a financial crisis.

What is covered and how payments work

Income protection is built to pay a monthly benefit if you cannot perform your job due to illness or injury, after a waiting period you choose. Policies typically cover a wide range of conditions, from mental health and musculoskeletal issues to serious illnesses that cause long absences. Many policies pay until you return to work, the end of the benefit period, or the policy end date - whichever comes first.

Claims are usually assessed against your ability to do your own job or a suitable role, depending on the definition in your policy. A claim starts once your chosen waiting period has passed - for example 4, 8, 13 or 26 weeks - and medical evidence supports your absence from work. Payments are tax-free if you pay premiums personally and replace a percentage of your gross income, commonly up to around 60 to 70%, capped by the insurer.

There are limits. Pre-existing conditions may be excluded or loaded with higher premiums. Non-disclosure can lead to a declined claim. Claims triggered by unemployment, redundancy, or deliberate self-harm are typically not covered. Short-term absences that do not extend past your waiting period will not generate a payment. If you receive employer sick pay, your policy may be structured to kick in afterwards so you do not over-insure.

A simple example: you choose a 13-week waiting period and a two-year benefit period. A back injury leaves you unable to work. You use savings and any employer sick pay for the first 13 weeks. From week 14, your policy pays the agreed monthly amount until you return, reach the two-year limit, or the policy ends.

Who benefits most - and who might not need it

Income protection suits people who rely on their earnings to meet monthly commitments and would face difficulty if that income stopped. Employees whose employer sick pay is limited, self-employed professionals with no sick pay, contractors, and those with mortgages or dependants often value this cover. Younger adults can benefit too, as premiums are typically lower when you are younger and healthier, and long-term illness can affect any age.

If you have substantial accessible savings that can cover a prolonged absence, or very generous long-term employer sick pay, you may decide the cover is less necessary. Those with limited income who would qualify for state benefits might prioritise essential spending first. The key is to weigh how long you could comfortably manage without income and whether statutory sick pay would be enough.

Choosing your cover level and options

1. Budget-friendly - short-term benefit

   • Pays a monthly benefit for a fixed period, often 1 or 2 years.
   • Lower premiums due to the capped payout length.
   • Suits those seeking protection against medium-length absences at a manageable cost.

2. Standard - long-term to policy end date

   • Pays until recovery or the policy end date, subject to limits.
   • Balanced mix of price and protection for prolonged illness or injury.
   • Often chosen by homeowners and main earners.

3. Premium - enhanced own-occupation cover

   • Strongest definition of incapacity focused on your specific job.
   • May include higher benefit caps and more flexible return-to-work support.
   • Higher cost, greater certainty for specialists and professionals.

4. Waiting period choices

   • 4, 8, 13, 26 or 52 weeks are common.
   • Longer waits reduce the premium, but you must self-fund longer.

5. Benefit amount and indexation

   • Typically up to 60-70% of gross income, subject to insurer caps.
   • Optional index-linking helps benefits keep pace with inflation.

6. Guaranteed vs reviewable premiums

   • Guaranteed premiums stay fixed unless you change cover.
   • Reviewable premiums can change over time - potentially cheaper upfront.

7. Optional add-ons

   • Fracture cover, hospitalisation day rates, specialist rehab support.
   • Waiver of premium so you do not pay while on a valid claim.

Key takeaway: match the waiting period to your savings and employer sick pay.

What it costs and why prices vary

Prices are illustrative and not guaranteed. Quotes vary by insurer and your personal circumstances.

Who can apply and what insurers check

Most UK residents in employment or self-employment can apply, typically between ages 18 and 59, with cover often running to a selected end age such as 60 or 65. Insurers ask for your job details, earnings, medical history, and lifestyle information. You may be asked to share GP reports, complete medical questionnaires, or attend medical screenings for higher sums assured.

Common reasons for declined or adjusted terms include undisclosed medical conditions, recent serious diagnoses, hazardous occupations, or requested benefits that exceed the insurer’s cap relative to your income. If you have pre-existing conditions, cover may still be available with exclusions or a higher premium. Providing accurate, complete information is essential - non-disclosure is a frequent cause of claim issues and can invalidate a policy.

From quote to claim - the simple path

1. Gather income details, employer sick pay, and monthly commitments.
2. Decide your waiting period based on savings and sick pay length.
3. Choose benefit amount - usually up to 60-70% of gross income.
4. Compare policies with your preferred incapacity definition.
5. Apply online or via an adviser with full medical disclosure.
6. Review offer terms, exclusions, and premium type before accepting.
7. Keep documents safe and update details when your income changes.
8. If ill or injured, notify your insurer promptly and follow claims guidance.

Strengths and trade-offs to weigh

Before you commit - key checks

Read the policy wording carefully, focusing on the incapacity definition and any exclusions related to pre-existing conditions. Confirm the waiting period fits your cash buffer and employer sick pay. Check the maximum monthly benefit, whether it is index-linked, and the duration of payments during a claim. Note any excesses or minimum claim periods. Understand whether premiums are guaranteed or reviewable and how renewal pricing could change over time. Keep identity and medical documents ready to avoid delays. Finally, make sure the disclosure on your application is complete and accurate - it is the best way to secure a smooth claim experience later.

Alternatives and related cover

1. Critical illness cover - pays a one-off lump sum on diagnosis of specified serious conditions. Useful for clearing debts or funding adaptations but does not replace monthly income.
2. Life insurance - pays a lump sum on death or terminal illness. Important for dependants and mortgages but does not protect income during illness.
3. Accident and sickness short-term cover - lower-cost policies with short benefit periods. Can suit short gaps but may not cover long absences.
4. Emergency savings - a cash buffer to bridge short waiting periods and small income shocks.

Common questions answered

Q: How much of my wage can I protect? A: Many policies allow up to around 60-70% of your gross income, subject to insurer caps. This aims to balance affordability with an incentive to return to work when you are able.

Q: How long do claims typically last? A: Claim durations vary widely. Some resolve in months, while others last several years. Industry data shows many long-running claims, reflecting conditions that take time to stabilise or recover.

Q: Will income protection cover redundancy? A: No. Income protection is designed for illness and injury only. Unemployment cover is a separate product with different terms, exclusions, and benefits.

Q: What are the most common reasons for claims? A: Musculoskeletal issues like back and neck pain are frequently cited, alongside mental health conditions and other illnesses that cause extended absence from work.

Q: Are claims usually paid? A: Acceptance rates in the UK are high, near 98%. Most declined claims result from non-disclosure or not meeting the policy’s incapacity definitions, so accurate disclosure is vital.

Q: Is it expensive? A: Many people overestimate the cost. For a healthy mid-30s non-smoker, starting premiums can be around the mid-£30s monthly, with price driven by waiting period, benefit level, and health.

Q: I have good employer sick pay - do I still need it? A: You may choose a longer waiting period to dovetail with employer benefits, or decide cover is unnecessary. The decision should reflect your savings, commitments, and risk tolerance.

What to do next

If this cover fits your needs, gather your income details, check your employer sick pay, and decide how long you could self-fund. Compare a few UK policies side by side, focusing on definitions, waiting periods, and benefit length. Take your time - a calm, well-matched choice is better than a rushed one.

Next step suggestion: request two or three quotes using the same benefit and waiting period so comparisons are fair.

Important note

This guide is general information, not personal financial advice. Policy terms, definitions, and exclusions vary by insurer. Always read the full policy documents, check your eligibility, and make sure disclosures are complete before you buy.