Key Points
- Income protection pays a regular monthly benefit if you’re unable to work due to illness or injury.
- The cost depends on age, health, occupation, policy length and chosen level of cover.
- Payments from personally arranged policies are usually tax‑free.
Why Income Protection Matters
A serious illness or injury affects more than just your health — it can also place significant strain on your finances. If you are unable to work and have limited savings or no access to company sick pay, a sudden drop in income can quickly become overwhelming.
Income protection insurance provides a financial safety net during these periods. It offers reassurance that essential bills, mortgage payments and everyday costs can continue to be met even when you cannot work. This is increasingly relevant in today’s economic climate, where living costs remain high and access to NHS services is often pressured.
This type of cover may be particularly valuable for the UK’s 4.37 million self‑employed workers, who are not eligible for Statutory Sick Pay (SSP)1. Even for employed individuals, SSP provides just £118.75 per week for up to 28 weeks — often far below what many households need to meet their financial commitments.
How Income Protection Works
Income protection is designed for situations where an illness or injury prevents someone from working for longer than a few months. If a claim is accepted, the policy pays a regular, tax‑free monthly benefit, typically covering between 50% and 70% of gross salary.
Policies can cover a wide range of conditions, including many cancers, heart attacks, strokes, mental health challenges, and numerous physical injuries, depending on the insurer.
Deferred Periods
A key feature of income protection is the waiting (deferred) period before payments begin. This can range from one month to a year.
- Shorter deferred periods = higher premiums
- Longer deferred periods = lower premiums
The right choice often depends on savings, sick pay arrangements and other safety nets.
Factors Influencing Premiums
Premiums are shaped by:
- Age
- Health and medical history
- Occupation
- Level and duration of cover
Policies may use guaranteed, reviewable, age‑banded or inflation‑linked premiums, each affecting long‑term affordability.
Claims and Policy Definitions
Understanding how a policy defines incapacity is essential:
- Own occupation – pays out if you cannot perform your specific job.
- Suited occupation – you may be expected to work in a role aligned with your skills.
- Any occupation – pays only if you cannot work in any capacity.
Choosing the wrong definition can lead to rejected claims. Non‑disclosure of medical history is another common reason claims fail.
Using Workplace Income Protection
If your employer offers income protection, reviewing the level of cover and deferred period is important. Many people supplement employer schemes with their own policies — for example, using a deferred period that begins once employer sick pay ends. However, insurers generally cap total income protection benefits to around 70% of gross income.
Planning Ahead
Income protection is designed to provide financial stability during extended periods of illness or injury. With the right policy, you can maintain your financial commitments without taking on additional debt at a difficult time. Professional advice can help ensure your cover remains suitable as your circumstances evolve. Get in touch today to see how we can help.
Source
1Office for National Statistics: EMP14: Employees and self-employed by industry – February 2026
The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.
Please note that these plans do not have a cash-in value and will stop if payments to them cease.
SJP Approved 02/04/2026