Income Protection Insurance: Why It Matters More Than You Think

What would happen if you couldn't work?

It's a question most people avoid thinking about. But the statistics are sobering: one in six people will be off work for more than six months due to illness or injury at some point in their career.

If that happened to you, how long could you manage financially? Most people have savings to cover a few months at most. After that, you'd be relying on statutory sick pay — currently £116.75 per week.

Income protection insurance bridges this gap.

What is income protection?

Income protection (also called permanent health insurance or PHI) pays you a regular income — typically 50–70% of your pre-illness earnings — if you're unable to work due to illness or injury.

Unlike critical illness cover, which pays a one-off lump sum for specific conditions, income protection:

• ●Covers any illness or injury that prevents you from working
• ●Pays out for as long as you're unable to work (up to the policy end date)
• ●Continues to pay until you return to work, retire, or the policy ends

How income protection works

The deferred period — this is the waiting period before the policy starts paying out. Common options are 4 weeks, 8 weeks, 13 weeks, 26 weeks, or 52 weeks. A longer deferred period means lower premiums — choose a period that aligns with how long your employer will pay sick pay.

The benefit amount — typically 50–70% of your pre-illness income. The limit exists because you shouldn't be better off not working than working.

The policy term — most policies run until your planned retirement age (typically 65 or 67).

Own occupation vs any occupation — 'own occupation' policies pay out if you can't do your specific job. 'Any occupation' policies only pay out if you can't do any work at all. Own occupation policies are more expensive but provide much better protection.

Who needs income protection most?

Self-employed people — without employer sick pay, you're immediately reliant on your savings if you can't work. Income protection is particularly important for the self-employed.

People with mortgages — your mortgage doesn't stop if you can't work. Income protection ensures you can keep paying it.

People with dependants — if others rely on your income, the financial impact of you being unable to work is even more significant.

People in physically demanding jobs — higher risk of injury means income protection is more important, though premiums may be higher.

How much does it cost?

The cost depends on your age, health, occupation, the benefit amount, and the deferred period. As a rough guide, a healthy 35-year-old in a desk job might pay £30–£60 per month for a policy covering £2,000 per month until age 65.

This is often less than people expect — and significantly less than the financial impact of not having it.

var(--inspire-text)]">Want to understand your protection options? [Book a free call with Michele to discuss what cover is right for your situation.