Income protection pays you a regular, tax free income if you’re unable to work due to illness or injury, replacing a portion of your usual earnings until you’re able to return to work, or until the policy ends. Unlike critical illness cover, it isn’t limited to a specific list of conditions, it responds to your inability to do your job.
For employed people with generous sick pay, income protection might be a lower priority. For self employed workers, contractors, and anyone without a safety net svvvfrom an employer, it’s often one of the most valuable policies available.
Statutory Sick Pay is currently £123.25 a week, paid for a maximum of 28 weeks, and self employed workers don’t qualify for it at all. If a claim runs longer, New Style Employment and Support Allowance pays up to £92.05 a week during the assessment phase, rising to a maximum of £140.55 a week if you’re placed in the support group. Compare that with income protection, where the Association of British Insurers recorded an average claim payout of around £10,000 a year in 2024, with 80% of claims paid.
The most common reason for a claim in 2024 was musculoskeletal conditions, such as back and joint problems, which made up 34% of all income protection claims. Mental health conditions were also among the leading causes, which is worth knowing if you’re weighing up whether this type of cover is relevant to you.
| Feature | Short Term Income Protection | Long Term Income Protection |
|---|---|---|
| Maximum payment period | Usually 1 to 2 years per claim | Can pay until retirement age |
| Typical cost | Generally lower premiums | Generally higher premiums |
| Best suited to | Budget conscious buyers, temporary conditions | Serious or long lasting conditions, ongoing security |
| Renewal | Often needs renewing periodically | Cover usually continues without renewal |
The deferred period is the length of time you wait after becoming unable to work before payments begin, similar to an excess on other insurance policies. Common deferred periods run from four weeks up to fifty two weeks. A shorter deferred period means cover kicks in sooner but usually costs more, while a longer deferred period lowers your premium but means you’ll need savings or other cover to bridge the gap.
If you have employer sick pay, it often makes sense to set your deferred period to match when that sick pay runs out, or to when Statutory Sick Pay stops at 28 weeks if you’re relying on that alone.
Insurers typically limit cover to a percentage of your gross income, often around fifty to sixty five percent, partly to remove any financial incentive not to return to work. We’ll help you work out a realistic benefit level based on your actual outgoings rather than simply maximising the figure.
Dan is a self employed electrician with a wife and two young children. He has no employer sick pay to fall back on if he’s injured on site. We arranged income protection with a short deferred period, so if Dan couldn’t work, a regular monthly income would start after a matter of weeks rather than months, keeping the household running while he recovered.
Aisha works in marketing and has three months of full sick pay from her employer, followed by three months at half pay. We arranged long term income protection with a twenty six week deferred period, timed to pick up exactly where her employer cover would start to taper off, avoiding any gap in her
household income if a longer illness kept her off work.
No. Payment Protection Insurance (PPI), often linked to a specific loan or credit card, tends to be short-term and limited in scope.Income Protection is a standalone, more comprehensive policy that covers a proportion of your actual income for a much longer period.
Many policies do cover mental health conditions, though terms vary between insurers and some apply specific conditions or exclusions. We’ll help you find a policy with definitions that genuinely suit your circumstances.
Yes, and it’s often particularly valuable for the self-employed, who typically have no employer sick pay to rely on. See our Self Employed Mortgages page if you’re also looking at mortgage options as a self-employed borrower.
Individual income protection policies you arrange yourself usually stay with you regardless of who you work for, unlike some employer-provided cover. This is one of the reasons many people prefer to hold their own policy rather than relying solely on a workplace scheme.
