What is Income Protection insurance?

It is a long-term insurance policy designed to help you if you can’t work because you’re ill or injured.

 

It ensures you continue to receive a regular income until you retire or can return to work.

  • It replaces part of your income - if you can’t work because you become ill or disabled.

  • It pays out until you can start working again - or until you retire, die or the end of the policy term - whichever is sooner.

  • There’s often a waiting period before the payments start - you generally set payments to start after your sick pay ends, or after any other insurance stops covering you. The longer you wait, the lower the monthly premiums.

  • It covers most illnesses that leave you unable to work - either in the short or long term (depending on the type of policy and its definition of incapacity).

  • You can claim as many times as you need to - while the policy lasts.

It’s not the same as critical illness insurance, which pays out a one-off lump sum if you have a specific serious illness.

 

It’s not the same as short-term income protection, which also pays out a monthly sum related to your income, but only for a limited period of time (normally between two and five years).

Do you need it?

According to the ABI, one million workers a year find themselves unable to work due to a serious illness or injury.


It doesn’t matter whether you have children or other dependants – if illness would mean you couldn’t pay the bills, you should consider income protection insurance.


You’re most likely to need it if you’re self-employed or employed and you don’t have sick pay to fall back on.
Check what your employer will provide for you if you’re off sick.

How much does income protection insurance cost?

How much you pay each month will depend on the policy and your circumstances.


Usually income protection insurance covers a wide range of illnesses and situations and has the potential to pay out for many years.


The cost of a policy will vary based on several factors, including:

  • Age

  • Job

  • Whether you smoke or have previously smoked

  • The percentage of income you’d like to cover

  • The waiting period before the policy pays out

  • The length of time you wish the policy to pay out for

  • Health (your current health, your weight, your family medical history).