Protect your financial well-being through income protection
In today’s economic climate, a person’s ability to earn an income is likely their most valuable asset. That’s where income protection insurance comes in.
An income protection policy provides a financial safety net if illness or injury prevents you from working. This not only ensures peace of mind, but also makes sure you can maintain your lifestyle and meet financial obligations if faced with periods of incapacity.
What is income protection?
Income protection is an insurance policy that pays out a regular monthly amount in the event that you are unable to work due to illness or injury.
Unlike critical illness cover, which provides a one-off lump sum for specific conditions, income protection offers ongoing financial support. Typically, a policy will pay between 50-60% of your gross salary until you can return to work, retire, or the policy term ends.
Key features include:
- Regular income: Monthly payments rather than a one-off sum
- Comprehensive cover: Covers most illnesses and injuries that prevent you from working
- Long-term support: Can provide benefits for years or even decades if needed
- Tax-free payments: Benefits are usually paid free of income tax
- Own occupation cover: The most comprehensive policies pay out if you’re unable to perform your specific job
The protection gap
According to the Association of British Insurers (ABI), income protection insurance remains one of the most undersold products in the UK. Only 17% of UK adults have income protection, suggesting millions of people without income protection are left vulnerable to financial hardship if they’re unable to work.
This protection gap exists despite concerning statistics:
- According to the ABI, over 1 million workers each year find themselves unable to work due to serious illness or injury
- Statutory Sick Pay is just £118.75 per week (as of April 2025) and only lasts for 28 weeks.
If your income stopped, would you be able to pay your bills and maintain your current lifestyle?
Why does income protection matter at different stages of life?
For single professionals
If you’re a single person relying solely on your income, you’re particularly vulnerable if you become too ill to work:
- You don’t have a partner’s income to fall back on
- Rent or mortgage payments must continue regardless
- There is limited government support available
- Savings can quickly deplete during extended illness
Having income protection in place can ensure your essential outgoings remain covered whilst you focus on recovery, without incurring debt or depleting hard-earned savings.
For families
For those with dependents, the financial implications of being unable to work extend beyond personal needs:
- Regardless of your health, family expenses continue
- Childcare and education costs must still be met
- Typically, mortgage or rent remains the biggest monthly expenditure for most families
- Your partner may need to reduce working hours to care for you
Income protection insurance can help families to maintain financial stability for the entire household during challenging times, ensuring children’s needs continue to be met without compromise.
For mortgage holders
It’s likely that if you have a mortgage your monthly payment will be one of your most significant financial commitments, making it a priority:
- Mortgage lenders will require payments regardless of your health
- Falling into arrears can risk your home’s security
- Mortgage payment protection alone typically only covers payments for 12-24 months
- Moving house during illness can add unnecessary stress
Knowing that income protection is in place can provide long-term security for homeowners, ensuring your most valuable asset remains protected throughout any period of incapacity.
Tailoring cover to your needs
When considering income protection, several factors should influence your decision:
- Deferred period: How long you can wait before benefits begin (typically 4-52 weeks)
- Benefit period: How long the policy will pay out (until retirement or for a fixed period)
- Definition of incapacity: Whether the policy covers inability to do your specific job or any job
- Indexation: Whether benefits rise with inflation
- Additional features: Some policies include rehabilitation support and back-to-work programs
The longer the deferred period, the lower your premiums will be. Due to this, some professionals align their deferred period with their employer’s sick pay duration for seamless financial protection.
The value of income protection
Income protection typically costs between 1-3% of your gross annual income, depending on:
- Age and health status
- Occupation and associated risks
- Chosen deferred period
- Benefit amount and period
- Smoker status
Whilst the NHS or private healthcare can provide excellent medical care during your time of need, they don’t replace lost the income lost during times of illness or injury. Income protection bridges this gap, providing financial security when you need it most.
For UK professionals at any life stage – single, with family responsibilities, or with property commitments – income protection represents an essential component of comprehensive financial planning. It safeguards not just your current lifestyle but your future financial wellbeing.
In a world where your ability to earn is one of your greatest financial assets, income protection ensures that temporary health setbacks don’t become permanent financial ones.