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A quick guide to income protection insurance

LifeSearch author Katie Crook-Davies
2 min read

by Katie Crook-Davies, Protection Writer

See author bio

Katie works with insurers and distributors to make protection propositions more accessible, pricing more transparent and marketing messages more simple.See author bio

Guide last reviewed 10 Oct 2023

Income protection insurance - it’s a product you probably don’t know much about. Let’s change that, because if there’s one product you definitely want to get to grips with, it’s income protection. Take two minutes to do just that right now.


What is income protection insurance?

Income protection insurance is designed to replace some of your monthly income if you are unable to work due to illness or injury. It pays a tax-free monthly benefit and keeps paying that benefit until you recover and are able to return to work, your policy comes to an end, or you retire.

Income protection insurance is designed to help you and your family cover your regular outgoings and maintain your lifestyle, should something nasty and unforeseen happen.

What income protection insurance isn't to be confused with is unemployment insurance or redundancy insurance, which is a separate type of cover completely.

Who needs income protection insurance?

Most people! 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 insurance 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. 

Here are just a few things you might want to think about:

  • Could you or your family cover your regular outgoings if you couldn’t work?
  • Would you get any financial support from your employer if you went off work sick?
  • Are you entitled to any state support if you couldn’t work due to ill-health?
  • Do you have any savings that you’d be able to use if you couldn’t work?
  • If you lost your income, could you change your lifestyle to reduce your regular outgoings, and would you be happy to do that?

There are lots of things that need to be factored in when working out if you need income protection insurance, so it’s worth having a chat with one of our friendly advisers on 0800 316 7253.

How does income protection insurance work?

Once you’ve decided that you need income protection insurance, 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. If you fall ill and become unable to work in that period of time, your income protection insurance will start paying your monthly benefit.
  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 insurance 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. Self-employed people, on the other hand, often choose very short deferred periods as they won’t have financial support from an employer.
  5. Definition of incapacity: This is what qualifies you to start receiving your income protection 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 insurance is an extremely useful product for many people, but it can be a little confusing. Request a call back from one of our friendly advisers, who are experts in income protection insurance and will happily take you through the five steps above to work out what cover you need. Read our linked article for more information on how income protection insurance works.

Is it hard to claim on income protection insurance?

No! In fact, your chances of claiming on an income protection insurance policy are usually far higher than your chances of claiming on a life insurance policy, or even a critical illness insurance policy, simply because you’re probably more likely to be off work due to an illness or accident, than you are to die or become critically ill.

In fact, the risk of a 35-year-old male being unable to work for two months or more is almost six times higher than his risk of death, before retirement*.

How much does income protection cost?

The cost of your income protection insurance will depend on a number of things, including:

  • Your age
  • Your health
  • Whether you smoke
  • Your job
  • Your cover level 
  • Your cover term
  • Your benefit term       
  • Your deferred period       
  • The definition of incapacity

As a simple rule, the more likely you are to fall ill and make a claim on your policy, the more expensive your cover will be. So the younger you are when you apply for your policy, and the healthier your lifestyle, the lower your insurance premiums will be.

At LifeSearch, we search the market to find the best value insurance for you, based on you and what’s going on at home. Simply request your personalised quote from us now.

Is income protection insurance the same as PPI?

You’ve probably heard of payment protection insurance (PPI), a product that protects specific debts and has been extensively mis-sold in the past. Income protection insurance is a very different product, as it pays the tax-free benefit directly to you, instead of to your lender, and gives you the flexibility to tailor the product to your financial needs.



Find out your income protection options and get a policy that fits your needs

An expert adviser from LifeSearch can answer your questions, explain what options are available and provide fee-free quotes so you know what's right for you.

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LifeSearch author Katie Crook-Davies
Katie Crook-Davies Protection Writer
Katie is an independent insurance consultant who is passionate about protection and wants to share that passion with others through engaging marketing content. She hopes that one day people will get as excited about protecting themselves and their loved ones, as she does!
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