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Income Protection Insurance

One of the safest ways to ensure you have a wage coming in when you can’t work.
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What is income protection?

Income protection insurance replaces some of your monthly income if you are unable to work due to illness or injury. It pays you a tax-free monthly income until you return to work, you retire, or your policy expires.

Whether you're employed, or self-employed, this type of cover is designed to support you and your family by covering your regular outgoings, to help maintain your lifestyle, should something unexpected happen.

Do I need income protection?

It's a pretty good idea! Unlike other protection products like life insurance and critical illness insurance, which are traditionally most suited to people with debts (usually a mortgage) - income protection is a useful solution for nearly everyone.

That’s because most of us earn a regular income, and would struggle financially to cover our outgoings if we were unable to work.

How much does it cost?

Like all life insurance-related products, the cost of income protection is based on a number of factors:

  • Your salary
  • Your occupation
  • Pre-existing conditions
  • Level of cover
  • Deferment period
  • Pay out term

Income protection cost and cover calculator

Our simple calculator can help you to work out what insurance you need and give you estimated costs for different types of life cover. You can then speak to an adviser or buy online.

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How does income protection insurance work?

There are five main choices that you’ll need to make:

  1. Cover level: The amount of benefit you’ll receive each month. You can choose the right level for you, but typically it’s up to 60% of your gross monthly income.
  2. Cover term: How long you’d like to be protected for. This is usually a fixed number of years, say 25, or however many years you think you’ll be in full-time employment.
  3. Benefit term: How long the insurance benefit will be paid if you’re ill and unable to work. Many people want the money to continue until retirement, but you can pick say two or five years if that’s all you need.
  4. Deferred period: How long after you’ve stopped working that you’d like the income protection benefit to start. This product feature can sometimes be a bit confusing, but often people don’t need their insurance to start paying straight away, particularly if they’re employed and they receive sick-pay for a period of time. If you're self-employed however, you might need a short deferred periods as you won’t have financial support from an employer.
  5. Definition of incapacity: This is what qualifies you to start receiving your insurance benefit. The definition that most insurers offer, and probably the simplest, is called ‘own occupation’, which means that if you are ill and can’t do your current job you qualify to start receiving the benefit. Some insurers also offer slightly stricter definitions, like ‘any occupation’, which means that to qualify for your insurance benefit you must not be able to do your current job, or any job at all, if you fall ill. 

Income protection is an extremely useful product for many people, but it can be a little confusing. Speak to one of our friendly advisers, who will happily take you through the five steps above to work out what cover you need.

What does my policy cover?

Illness - If you are signed off work by your GP for any illness, your policy is there for you and will start paying out once your deferment period has ended - it could be anything from anxiety or depression, to a stroke or heart attack. Income protection extends to any reason you're forced off work sick.

Accident / injury - From car accidents and broken bones, to putting your back out in the gym. Your policy will start protecting you once your deferment period has ended and if your GP believes you are unable to work.

What isn't covered?

Death - Income protection doesn't cover you upon death. Instead, you would need a life insurance policy.

Redundancy - It doesn’t cover redundancy, only health-based absence from work while you’re still employed. Redundancy cover can be bought as part of mortgage protection insurance so if in doubt speak with an expert adviser.

Dismissal - It falls into the same category as redundancy, and isn't covered under income protection.

Can I get income protection if I'm self-employed?

Absolutely! Income protection is important for everyone, especially those who are contractors, freelancers, self-employed, business owners, or even on a zero-hours contract.

A career under your own steam is a great thing, but it carries risk. What’d happen if you broke a limb, got sick, or your mental health took a turn (dependent on condition)? What if a poor health situation lasted for weeks, or months, or longer?

In many cases, being self-employed means you rely, mostly or entirely, on yourself, your skills, your mind and your body. If that’s your situation, you need to think seriously about covering any scenarios where you’re unable to show up.

A Little more about LifeSearch

Life insurance isn’t fun. There are several kinds of life insurance policies to choose from, and dozens of providers with their own versions of those products.

Without LifeSearch in your corner that’s a lot of reading … reading you don’t have to do.

Frequently asked questions about income protection

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