TL;DR
Income protection - key points
Income protection helps replace part of your income if you cannot work because of illness or accident.
Your claim must meet the policy conditions. Payments are subject to a waiting period and the policy’s benefit limits.
It may be useful if your household relies on your earnings, including if you are self-employed. Compare your essential spending, sick pay and savings, then discuss the benefit amount, payment period and exclusions at a free, non-binding consultation.
If illness or injury prevents you from working, income protection can help with bills and other ongoing expenses. The benefit replaces part of your income, and payments depend on meeting the policy conditions, the waiting period and the maximum benefit period.
Why do I need income protection cover?
If you are self-employed, run a small business or work on a zero-hours contract, consider how your household would manage if illness stopped you working. This is especially relevant if other people depend on your earnings.
Imagine a situation where you cannot work due to injury or illness. How will you cover all your living expenses, pay your mortgage or support family members financially? Income protection can help with household expenses while you are unable to work, subject to the policy terms.
The amount you can insure depends on the policy and how the insurer assesses your earnings. Compare the proposed monthly benefit with your essential expenses rather than assuming a fixed percentage will be enough. Payments from a personal policy are generally free of income tax when you pay the premiums from taxed income without income tax relief. Employer-funded arrangements can have different tax treatment.
You can read more about this in the article Why do I need income insurance?
What types of income protection cover are there?
The policy term is how long your cover lasts. The benefit period is the maximum time a claim can pay. Available options depend on the insurer.
Short-term income protection limits payments for a claim, for example to one or two years. Payments can stop at that limit even if you remain unable to work.
Long-term income protection can continue paying while you meet the claim conditions, potentially until retirement or the policy end date. It does not guarantee payments until retirement.
You can find lots of useful information about these policies on the government’s Moneyhelper website.
What should I compare before choosing cover?
Your premium depends on factors including your age, health, occupation, benefit amount, waiting period and maximum payment period. Compare quotes on the same basis and check whether premiums stay fixed or can increase.
Check how the policy defines inability to work. ‘Own occupation’ relates to your own job; other definitions may assess your ability to do different work. Read any exclusions, including those relating to existing health conditions, and answer the insurer’s application questions accurately.
Take care of your safety today
Planning how you would pay essential bills during illness or injury can help you identify a gap in your household budget. Consider income protection alongside your savings, existing cover and any employer sick pay.
Insurance consultations and advice from Extend Finance are free and without obligation, including any follow-up discussions. We can discuss your questions, existing cover and circumstances to help you compare suitable options. If a policy is arranged, the insurer pays us commission; you pay the insurance premium and no advice fee to us.
Frequently asked questions
How does income protection differ from critical illness cover?
Income protection can pay a regular benefit when illness or injury prevents you from working under the policy’s definition of incapacity. Critical illness cover usually pays a lump sum following a diagnosis or event covered by the policy, provided its conditions are met. The products have different claim conditions and are not interchangeable.
Does income protection cover redundancy?
Standard income protection pays for a qualifying inability to work caused by illness or injury, rather than simply because your job ends. Being made redundant while you are fit to work does not normally trigger a claim. If unemployment is your concern, check whether any separate policy expressly covers it and its eligibility and exclusion rules; do not assume it is included in income protection.
Can self-employed people get income protection?
Yes, subject to the insurer’s eligibility rules. Check how it calculates your earnings and what evidence it requires, such as accounts or tax returns, especially if your income varies.
What is a deferred period?
It is the agreed period of qualifying inability to work before benefits become payable. Match it to your sick pay and savings, and check when the first payment would actually arrive, allowing for claim assessment and the payment schedule.