Income Protection

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Income Protection offers financial protection for you in the case of you being unable to work due to illness or disability.

Income Protection is an insurance policy that pays you a tax free monthly sum until you are able to return to work, or until your chosen retirement age. The plan will ensure that you can keep paying your monthly bills and retain an income if you find yourself unable to work due to ill health.

Our expert advisers will find the right insurer and best income protection policy to give you peace of mind for your financial future.

What is Income Protection?

Income Protection Insurance provides you with a monthly income in the event you are unable to work. It is designed as a long-term benefit with policies paying anywhere from a minimum of two years right through to your anticipated retirement age.

Income Protection Insurance is referred to in a number of ways: Income Protection, Income Insurance or Income Replacement Cover. The policy provides you with a tax free monthly income until your selected retirement age (usually between 50 and 70) if you are unable to work due to an illness or disability. Depending upon your budget and needs you can either insure your full nett monthly income or a portion of this amount.

Income Protection policies will typically cover a set amount of your PAYE earnings. This type of insurance is not designed to be set up to cover income from benefits, it is purely about your earnings through an employed job, that are classed as PAYE income.

Sometimes people ask about income protection insurance to cover situations such as loss of contracts, business interruption, loss of licenses, redundancy or unemployment. There are specific insurances that you can apply for that can cover some of these situations, but they are not income protection policies.

Take a look at our video that takes you through what income protection is:

Do I Need Income Protection?

In the UK if you are unable to work due to a long term illness or disability you may become dependent upon Statutory Sick Pay (SSP) to meet your essential living expenses. State SSP requires that your employer pay you £116.75 per week for a maximum period of 28 weeks*. How would you pay for your bills and food with this?

For 6 and a half months you will receive just £3,269 to live on.

In order to be eligible for SSP you must have:

Performed some work at the Employers before you became sick
Had at least a four day period of incapacity to work (PIW),
Pay National Insurance contributions
Have not already received 28 weeks of SSP during employment
and have notified your Employer of the incapacity within the time period set in your contract (often seven days).

You are also likely to be asked to provide evidence of your incapacity and this will probably be written confirmation of your health from your GP.

In this video we give a quick background into why income protection is so important for your financial security:

How Much Income Protection Do I Need?

The price of Income Protection policies are based upon your occupation, age, health, chosen retirement age and the amount of your monthly income that you wish to protect.

When you look at income protection options you will usually be able to insurer anywhere up to 65% of your gross income. There are some policies that allow you to insure more of your income, if they are arranged through your employer.

When you are considering how much income protection that you need, you should ask yourself the following questions:

If I could not work from tomorrow because I was too ill, how much money will I ‘need’ to cover my bills?
If I could not work anymore because I am too ill, how much money would I ‘want’ to receive each month.

Needs and wants are essential here. With income protection the minimum amount of insurance you should arrange is what you need to pay your bills. It’s also worth looking at what you want to as covering your bills is key, but would you want some extra money to have spare for other things.

In this video I am talking about how much insurance you need for income protection:

What Is An Income Protection Deferred Period?

When you apply for Income Protection Insurance you will be required to choose a deferment period for when you can start claiming on the policy. The longer the deferment period you have the cheaper your policy will be, however you need to consider how long you can practically manage on a reduced income before the policy benefit kicks in.

You will be asked to choose between 4, 8, 13, 26 or 52 week period of deferment, which represents the amount of time you must be unable to work before you can claim. There are specialist insurance providers who can offer deferment periods of one day and one week, and if you would like more details of their policies please get in touch.

If you are one of the lucky few who have an enhanced sick pay scheme with your employer, Income Protection Insurance can be used to top up any loss in your earnings if your illness continues. Enhanced sick pay schemes are often structured to provide your standard salary for six months followed by half pay to a maximum of one year. An Income Protection policy can be tailored to your needs, replacing half of your income at the six months period and then progressing to the full income benefit at the end of year one.

The main thing you need to make sure is that your income protection does not kick in before your pay from work stops. You can watch this video for more details:

How Much Does Income Protection Cost?

This is depends upon your age, smoker status, BMI, health, occupation, family medical history and more. The cost of income protection for someone that is in their 20s wanting £1,100 per month with a maximum 2 year claim period, will be very different to a person in their 40s wanting £3,200 per month and a claim that can go up to age 70.

The beauty of income protection is that there are so many ways that you can build and mould it to suit your circumstances and the price that you are willing to pay for it. Income protection costs more than life insurance and this can be off putting for some people, but the reason for this is because statistics show you are far more likely to be ill and unable to work, than you are to die unexpectedly.

There can be quite a bit of confusion over the way that income protection premiums work and you can learn more about this in our video:

I'll Be Insured For Any Reason That I Cannot Work?

This is a yes and no situation. Income protection pays claims relating to your inability to work due to being ill and signed off by your GP. It is completely focused upon your health and ability to work, and also you being at a financial loss due to your situation.

Income protection exclusions are usually linked to your health or potentially any high risk sports that you are doing. The insurers basically say if you are already doing something, or living with a condition that puts you at a higher risk of making a claim, we might exclude claims relating to it.

Some examples of common exclusions for income protection are:

Mental health
Back pain

As well as this different insurers have different rules when it comes to their claims. It’s very important to know what you are signing up for. Stress is a perfect example here. Some insurers will pay out an income protection claim if your GP says that you are experiencing stress. But, some insurers don’t class stress as a medical condition, they instead consider it as a symptom of another condition, meaning that they might turn down the claim. This certainly doesn’t sound ideal and the main thing is to make sure that you know what you are signing up for.

Here is an explanation of how income protection exclusions work:

Income Protection Claims

The whole point of any insurance is the claim. When we take out policies like income protection, we are taking them out on a just in case basis, we never want to actually be in the position of having to make a claim. But, we also want to know that if we do need to make a claim that it will do what we expect it to do.

Many people think of insurers as these massive entities with huge loopholes to get out of paying claims. That can seem to be the case sometimes, but with income protection this isn’t the truth, provided that you know exactly what you have signed up for in the first place.

The Association of British Insurers shared that in 2023 insurers within the UK paid out £810m in income protection claims for the year.**

This is a huge amount of money being paid out to people who are ill and seriously need financial support.

Here is a bit more about how income protection claims work:

Income Protection in Action

The below powerful short video, made by Aviva, demonstrates that having Income Protection in place is more than just a pay-out. With some insurers you can access specialists who can provide rehabilitation to help you get back to normality.

Getting Back To Work

Income protection policies will pay a claim to you as long as you are ill and unable to work, until the claim period ends. The claim period could be a maximum 1 year, 2 years, 5 years or all the way to retirement. Whilst the claim could pay for that long it is possible that it won’t.

It’s best to explain this with some examples:

Broken leg – Let’s say you break your leg and need 4 months off work. Your income protection policy might be able to pay up to your retirement age, but if you can get back to work the expectation is that you will do so. You can protect a lot of your monthly income with an income protection policy, but you will likely still be better off financially if you go back to work.
Parkinsons – This time let’s think along the lines that you are diagnosed with Parkinsons. If you are told that this condition has reached a level where you can no longer work, it’s unlikely that you will be able to get back to work, so the claim will last as long as the policy allows.

These are very simplistic examples of claims and they can potentially get quite complicated, and that is why using a broker like ourselves can be so useful. Not only will we make sure that your income protection policy matches you and your work, we make sure that you understand what you are covered for, any limitations, and also help you at the point of a claim.

With income protection policies you often also have what is known as a phased return to work. Where the insurer works with you and your employer, to get you back to work gradually, to build you back up and make sure you’re ok before the claim stops.

You can listen to more about income protection claims here:

Is it easy to get income protection?

This very much depends upon what your personal circumstances and the amount of cover that you are wanting to secure. Medical conditions, hazardous pastimes, occupations and foreign travel will all need to be fully disclosed to the insurance provider at the point of application. The acceptance terms of your application by the Insurer will be dependent upon the perceived added risk of your disclosure.

Income Protection Insurance will be underwritten with your details and you will be provided with acceptance terms of either normal (standard policy premium), special terms (increased policy premium and/or condition exclusions), or in extreme circumstances you will be declined cover. It is essential that you place your Income Protection Insurance application with an insurance provider who is most likely to offer you cover and at the best terms. This is where our years of experience in the insurance market comes to your advantage!

Income Protection Insurance is often mistaken for Accident, Sickness and Unemployment Cover (ASU). ASU provides short term cover for Accident, Sickness and Unemployment with a maximum benefit period between 12 and 24 months. To read more about the ASU policies that you can have please visit our Accident, Sickness and Unemployment page.

It's not just about you

In this podcast, co-hosted by our Managing Director Kathryn Knowles, the financial journalist Kara Gammell talks about her experiences with income protection. She talks about how her mum and dad both fell ill whilst she was in her teens and how income protection allowed her family to maintain their standard of living, whilst allowing her parents to focus on their health.

To see the transcript for this podcast please visit the Practical Protection website.

Income Protection Quiz

Now that you have a bit of an idea about income protection you might find it interesting to take our income protection quiz.

There is some jargon (sorry!) but it’s a good way to make sure that you understand some of the key parts of this valuable insurance.

You can take the income protection quiz here.

Client Reviews

Cura Financial Services has been rated 4.9 out of 5 based on 827 reviews.

Review by Mark on 1st April 2016

“I was really dubious about using someone on the end of a phone but I have to say that these guys were just great. I was told by my local broker that I could not get income cover due to my job but not only did this company sort the cover but it was really well priced too. Highly recommended company.” - 5 

You can read more of our reviews here.

https://www.gov.uk/employers-sick-pay (accessed 12 February 2025)

ABI – Income Protection Statistics (accessed 12 February 2025)

Dr Kathryn Knowles Phd

Author
This page was written by Dr Kathryn Knowles Phd, an award-winning insurance adviser. To read more about Kathryn please see her bio here

Client Reviews

"Alan and his team were great! Alan helped get me cover where my own company could not (I work in financial services too!) Would highly recommend and will come back in the future."

"Krystle was fantastic throughout and managed to knock almost 50% off my current life insurance premium."

"Leanne couldn't have been more helpful and thoughtful with her questions and work on my enquiry."

"Kathryn and her colleagues were very helpful because of my recent illness."

"Nick was my advisor, Excellent knowledge of products and what I needed, not just pushing me into a sale/policy, will always refer to him in the future."

"I would like to say a very big thank you especially to Amy you really went above and beyond."

"Annaliese was absolutely fantastic, making us both feel at ease and helping us navigate issues that had caused us problems with previous attempts to obtain insurance."