Income Protection Myths

New research¹ from LifeSearch and HomeOwners Alliance reveals widespread gaps in financial understanding, with many homeowners unclear about how they would cope financially if illness or injury stopped them from working.

The research highlights significant gaps in understanding around income protection – an insurance policy sometimes described as ‘personal sick pay’ because it helps support household finances when someone cannot work. The findings show that from mental health to self-employment, many homeowners misunderstand what this cover does, who it's for and when it can help, leaving households more financially exposed than they realise.

The research - which comes during Financial Literacy Month (April) - highlights five myths about income protection among homeowners:

1. Mental health: a hidden financial risk

Mental health is one of the most significant blind spots. More than a quarter (26%) of homeowners wrongly believe income protection does not cover conditions such as anxiety or depression. Among those who already hold a policy, this rises to one in three (34%), and to 37% among the under-35s.

Only a quarter of homeowners correctly understand that mental health conditions are covered, while nearly half (48%) say they simply do not know.

Mental health has been reported as the leading reason for both short and long-term absences in the workplace². According to the Association of British Insurers (ABI), mental illness is among the most common reasons people rely on income protection and accounted for the highest value of claims in 2024, totalling £37 million.

2. Self-employed protection gap persists

The research from LifeSearch and HomeOwners Alliance also highlights a continued misconception around eligibility. One in six homeowners (16%) incorrectly believe the self-employed cannot access income protection, rising sharply among younger groups (31% of under-35s) and those that already hold cover (28%). A further 38% do not know whether this is true.

With more than 4.3 million people⁴ now self-employed in the UK, this risks leaving a large group of homeowners without any meaningful financial safety net if illness or injury stops them working.

3. Losing a second income can hit just as hard

The research also points to a gap in how households think about risk. Nearly one in five (18%) homeowners believe only the main earner needs cover, with uncertainty particularly high among younger households (30% of under 35s) and those with children (26%). One in four (26%) of people who currently have cover also agree that it is something that only the main earner of the home needs.

In reality, many households rely on two incomes to cover essential spending such as mortgages, utility bills, and other living costs. In 2024⁵, joint first time buyer mortgage applications reached 62%. If one income disappears, statutory sick pay alone is unlikely to come close to filling the gap.

4. Everyday illnesses, not just life-changing events

More than a third (36%) of homeowners believe income protection would only help for permanent or very serious conditions. This rises to nearly half (49%) of under-35s and to 45% of existing policyholders. A further 36% of homeowners do not know what conditions are covered.

In practice, according to the Association of British Insurers, people most often rely on this type of support for everyday health issues that prevent them from working, such as musculoskeletal injuries or mental health conditions.

This myth risks discouraging people from claiming when they are entitled to support - or, worse, from taking out a policy at all. Broken bones, recovery from surgery, and conditions that take weeks or months to resolve can all qualify.

5. Think you can only use it once? Think again

Over a fifth (22%) of homeowners believe they can only claim once on an income protection policy - rising to 26% of those that currently have a policy and 36% of under 35s - while most policies allow multiple claims.

Debbie Kennedy, CEO of protection specialist LifeSearch, said: "Most people rely on their income to keep the household running - the mortgages, the bills, everyday life – without always knowing how limited the safety net would be if illness or injury stopped them working.

"Income protection is designed to fill that gap. It covers mental health conditions, everyday injuries, time off for surgery, and it's available to the self-employed. Yet this research shows that millions of homeowners - including people who already own a policy - don't know that. That's why good advice from a specialist adviser is so valuable - not just when you take out cover, but as your life and circumstances change – it’s the difference between a policy that truly protects you and one that sits in a drawer, misunderstood, until it's too late."

Paula Higgins, CEO of Homeowners Alliance, said: “These findings reveal a clear gap between perception and reality when it comes to income protection. Many homeowners wrongly believe it won’t cover mental health, isn’t available to the self-employed, or only pays out for serious conditions - leaving them more financially exposed than they realise.

“At a time when more people are self-employed and households depend on two incomes, these misconceptions matter. Income protection can provide vital support if illness or injury stops you working, yet too many people either misunderstand it or overlook it entirely.

“There’s a real need to improve awareness so people understand what cover is available before it's too late.”

Income protection insurance replaces some of your monthly income if you are unable to work due to illness or injury. It pays 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.

LifeSearch is one of the UK's leading protection advice specialists, blending technology with expert human advice. Since 1998, it has helped over one million people, families and businesses secure 1.7 million policies through its team of 280 specialist advisers. LifeSearch has innovated by embedding protection into wider conversations, reaching consumers in underserved markets to support its ambition to protect people properly.

¹ The research was conducted by Opinium surveying a nationally representative sample of 2,000 UK adults aged 18+ between February 13–18, 2026, including 1,233 homeowners.

² Sick days highest for fifteen years, says CIPD with mental health ill cited as the main reason | British Safety Council

³ Protection insurers pay out record £7.34 billion to support individuals and families | ABI

⁴ Employment in the UK: Economic indicators - House of Commons Library

⁵ https://www.lloydsbankinggroup.com/assets/pdfs/media/press-releases/2025-press-releases/halifax/250214-halifax-first-time-buyer-market-rebounds.pdf