Why you need income protection insurance

Most of us rely on our income to keep life moving - covering everything from mortgage or rent payments to household bills and everyday essentials. But if illness or injury stopped you from working, that financial security could come under pressure. Income protection insurance is designed to provide a regular income if you’re unable to work because of ill health or injury, helping you stay on top of your commitments while you focus on getting better. For many people, their income is one of their most valuable financial assets. Yet it’s often the one thing least protected. Even a short time away from work can have an impact on your finances, especially if your sick pay is limited or you’re self-employed. Having the right cover in place can offer reassurance that if the unexpected happens, you’ll still have financial support when you need it most. In this guide, we’ll explain how income protection works, what it covers, and why it could play an important role in protecting your financial future.

What is income protection insurance?

Income protection insurance is designed to help you and your family cover regular outgoings and maintain your lifestyle if you can’t work due to illness or injury. It pays a tax-free monthly payment, usually between 50% and 70% of your gross income, while you take the time to recover. Payments can continue until you’re well enough to return to work, your policy comes to an end, or you retire - depending on the cover you choose. Income protection is there to replace part of your income, helping you stay on top of everyday expenses while you focus on your recovery. If you’re asking yourself, “is income protection worth it?”, it can help to think of it less as a one-off payout and more as an ongoing financial safety net - providing regular support when you need it most.

Do I need income protection insurance? 

Illness and injury can happen without warning - and when they do, the loss of income can put pressure on your finances sooner than many people expect. 

Here are some of the most common reasons people might put off income protection: 

(The below to be in separate boxes ideally if CMS allows) 

1.“I won’t get ill”

Nobody wants to imagine being too unwell to work. But it’s more common than many realise. Research shows that musculoskeletal conditions (conditions that affect muscles, bones, joints, and ligaments), and mental health issues remain among the biggest reasons for long-term sickness absence in the UK [1]. And with over 2.8 million people not working due to long-term sickness, it’s clear that being unable to work isn’t as rare as we’d like to think. Income protection is there to help bridge that gap - giving you a regular income while you recover.

2.“I can use my savings”

Savings can be a valuable safety net. But for many, they may not stretch as far as expected. Recent UK data shows that 31% of adults have either no savings at all [2] or less than £1,000 set aside. That means nearly one in three people could struggle to cover even a few weeks of essential bills if their income stopped. Income protection can help protect your monthly income, so you can keep your savings for genuine emergencies. If you’re asking yourself "is income protection worth it", it’s worth considering the peace of mind that comes with not having to dip into money you’ve worked hard to build.

3.“My employer will support me” 

It’s easy to overestimate how much support you’d get from work if you were off sick. 

For most employees, Statutory Sick Pay is £123.25 per week [3] - which may be a big drop from your normal income. Some employers offer enhanced sick pay, but not all, and often only for a limited time. 

That’s where income protection can make a difference - helping cover your regular outgoings when your earnings stop. 

4.“I already have critical illness cover” 

Critical illness cover can be incredibly valuable, but it works differently to income protection insurance.  It usually pays a tax-free lump sum if you’re diagnosed with a specific serious illness listed in your policy. Income protection pays a regular monthly income if you’re unable to work because of illness or injury. 

The key difference is flexibility - critical illness insurance pays once, whereas income protection can pay monthly, and often more than once, if you need to claim again later. 

Both types of cover are designed to do different jobs and can work well together.

5.“I don’t have anyone depending on me” 

Income protection isn’t just for people with children or a partner. If you rely on your income to pay your mortgage, rent, bills or everyday living costs, then your income is still very important. 

Unlike life insurance, which protects the people you leave behind, income protection is there to protect you while you’re still here - helping you stay financially afloat when life takes an unexpected turn. 

How much does income protection typically pay out? 

Most income protection policies typically pay around 50% to 60% of your gross monthly income, usually as a tax-free benefit. 

When setting up your cover, you’ll choose a deferred period (the length of time you wait before payments begin). The deferred period is set to line up with any sick pay or savings you already have in place, so your cover starts when you’re most likely to need it. 

Once your claim is accepted, payments can continue until you’re able to return to work, reach the policy’s agreed payment limit, your cover ends, or you retire - depending on the type of policy you choose.

What doesn’t income protection cover? 

Most policies won’t cover pre-existing medical conditions unless they’ve been disclosed and specifically accepted by the insurer. Claims linked to self-inflicted injuries or alcohol and drug misuse are also usually excluded. 

Pregnancy itself isn’t typically covered, although some policies may pay out if there are medical complications that leave you unable to work. 

Depending on the insurer, there may also be restrictions around certain conditions - such as back problems or mental health claims - as well as waiting periods before payments start or limits on how long claims can last. 

The key is making sure the policy fits your circumstances. Taking the time to understand the detail, and asking how much income protection insurance could cost for the level of cover you need, can help you choose the right protection with confidence.

Find a policy that fits your needs 

Choosing income protection isn’t always straightforward. It’s worth thinking about the financial support you already have in place - whether that’s savings, employer sick pay, government support, or other insurance - and where the gaps might be. 

It’s also important to understand how much income protection insurance could cost for the level of cover you’d need, so you can balance protection with affordability. 

That’s where expert advice can make a real difference. A LifeSearch adviser can talk you through your options, answer your questions, and help you compare fee-free quotes, so you can make the right decision for you. Get in touch today to find out more.  

(just bold) References 

[1] Office of National Statistics 

[2] FCA.org  

[3] GOV.UK