Best Income Protection Insurance - (Review of Top Companies)

Chris Steele
Founder and Editor
Chris is our resident private health insurance and healthcare expert. He has over a decade of experience writing about private medical insurance and treatment. He's Chartered Insurance Institute qualified and is regularly quoted by the national press.
Chris Steele
Reviewed by
Reviewed by
Updated on
May 8, 2024

The “Best Income Protection Insurance” for you will for you depend on your personal circumstances, but in this guide, we give you an overview of the leading companies and their policies. 

As seen in:
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Best Income Protection Insurance - Post Intro
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Best income protection insurance policies 2022

The best income protection insurance policies in 2022 are:

  • AIG life - YourLife Plan Income Protection
  • Aviva - Income Protection Options
  • British Friendly Society - Protect
  • L&G - Income Protection Benefit
  • Liverpool Victoria - Flexible Protection and Mortgage
  • Nationwide - Income Protection Benefit
  • Royal London - Personal Menu Plan
  • The Exeter - Income One Plus
  • Vitality - A variety of Income Protection Cover products
  • Wesleyan Assurance Society - Personal Income Protection Plan
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What is income protection insurance?

Income protection insurance is a policy that will pay out a monthly sum if you’re unable to work due to illness, injury or unemployment. The policies are designed to cover your living costs while you’re not working and will continue to pay out until you’re able to return to work. If you’re unable to return to work, then it’ll continue to pay out until you retired or die. It’s also sometimes referred to as permanent health insurance.

Typically income protection will do the following:

  • Cover up to 70% of your gross annual salary
  • Payout from as little as 1 week of illness or injury
  • Protect your income for the rest of your working life
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What does income protection insurance cover?

Income Protection insurance isn’t limited to a set list of illnesses and conditions and many insurers have very few standard exclusions. It’s therefore considered to be the most comprehensive type of incapacity cover currently available.

Income protection insurance is designed to cover anything that medically prevents you form working, including injuries, accidents and periods of sickness. 

The best income protection insurance will cover you in your chosen occupation, meaning as long as you can’t do your specific job, you’ll be able to make a claim. 
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Unemployment insurance

To give you comprehensive salary protection, we would also recommend you consider adding Unemployment Insurance to your policy. This will pay out if you lose your job through forced redundancy. 

To qualify for an Unemployment Insurance payout you need to have lost your job through no fault of your own. Assuming that’s the case, you’ll receive a payout for 12, 18 or 24 months depending on your policy and if you can find a new job, whichever is sooner. 

Broker tip: Buy Unemployment Insurance separately to Income Protection Cover

Unemployment Insurance tends to be a short-term policy and while you can buy Income Protection Insurance at the same time, it’ll likely be on those shorter terms too. We always recommend buying two separate policies, so that your Income Protection Insurance doesn’t merely cover you in the short-term. 

In another recent guide, we’ve looked at the best life insurance companies.

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What isn't covered by income protection insurance?

Even the best Income Protection Insurance won’t cover certain situations, namely, these are:

  • Self-inflicted injuries 
  • Drug misuse 
  • Alcohol misuse
  • Travel to a country with an active conflict where the Foreign Office has advised against travel or with an active epidemic
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What impacts the cost of Income Protection Insurance?

There’s a number of factors which will impact the cost of your policy, some of which you have control over and others you won’t. When you configure your policy you’ll get to choose when the payouts should start and what percentage of your monthly gross salary you’d like to cover. Alongside this, you’ll need to disclose your age, health, job and whether you’re a smoker or not. 

Claim waiting period

Most insurers will allow you to set a waiting period, sometimes called a deferred period, between 4 to 52 weeks.  If for instance you have little in savings and you’re concerned how you’d pay your mortgage and other day-to-day expenses if you became unwell, then we’d recommend setting the waiting period to only a short period of time, so that the insurance payouts kick in as soon as possible. Of course, the shorter the waiting period the more expensive the policy will be and if you can afford to make it a little longer then it can be an effective way to bring the cost of a policy down. 

Percentage of your gross monthly income

Another factor which will directly affect the cost of your policy which you have control over is the amount of money you would like the policy to pay out if you can’t work. Usually, you can ask for up to 70% of your gross monthly salary tax-free, but bear in mind, the more you want the higher the price of the income protection insurance will be.

Existing health conditions

Existing health conditions can make taking out an Income Protection Policy a little more complicated. When you are setting up your policy you’ll need to declare any health conditions and you may find that the insurer either increases your premium, excludes the condition or offer to cover the condition on standard terms.

It’s vital that you’re honest and transparent when setting up any insurance policy, especially when it comes to pre-existing medical conditions. Usually, it’s best to speak to an independent expert if you have health conditions as they will be able to advise you which insurers are most likely to provide you with cover. 

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Do I need income protection insurance?

There are a number of reasons why you may choose to buy Income Protection Insurance, some of those include:

  • Not having much in the way of sick pay from your employment
  • Having financial dependents who rely on your income
  • You’re self-employed and don’t have any sick pay to fall back on

For more information about whether you might need income protection insurance, please use this useful guide from the Citizens Advice Service.

Best Income Protection Insurance - Quote
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Is this the best type of illness insurance for me?

With there being a number of illness insurances for you to choose from, knowing which is right for you can be difficult. Income protection can be very expensive, mainly due to the fact that it has few exclusions and provides excellent coverage. If the cost of Income Protection Insurance is too high for you then considering a different type of policy such a Critical Illness Insurance could be worthwhile. You won’t receive the same level of cover as with Income Protection Insurance, but it’ll likely be more affordable. 

When should I buy income protection insurance cover?

The simple answer is when you’re young and healthy. As with other types of protection, buying young and when you have no or few health conditions is the key to getting reasonable premiums. Unfortunately, it tends to be when we’re a little older and once we’ve amassed a number of commitments that we realise that we’re somewhat exposed and start looking at this type of protection. 

Unfortunately, similarly to health insurance, people often wait until they have a health condition which they are concern about, and at that point, it’s too late as the insurer will more than likely insert an exclusion onto the policy or refuse cover altogether. 

There are a number of times in your life when you might wish to consider buying Income Protection Insurance, these include:

  • When you buy a home

Buying a home is likely to be the single most expensive purchase in your life and it’s also a significant responsibility. We commit to paying off the mortgage over the course of much of our working lives, but if you can’t work what’ll happen to the mortgage repayments? We often hear from people that have recently moved that are looking to change their levels of protection, whether that be life insurance and/or income protection insurance.

  • Changing jobs or being promoted

When you change jobs or get a promotion it’s a time for celebration, but also it can mean that you’re slightly more exposed to risk than you were before. For example, perhaps you’ve moved companies or signed a new contract which resets your sick pay entitlement. Either way, it’s an excellent time to look at Income Protection insurance.

  • Becoming self-employed

There’s nothing quite like being self-employed, with all of the freedom and opportunity it provides, however it comes with a fair amount of risk, not least what should happen to your financial commitments if you become unwell. If you’re anything like the other 5 million self-employed individuals in the UK, it’s likely if you’re sick or off work you won’t be paid. Becoming self-employed is, therefore, an excellent time and reason to take out income protection insurance.

  • The birth of a child

The birth of a child shouldn’t be a time of worry, but it can be if you have a significant number of financial commitments you need to meet each month. A child tends to focus the mind and usually makes people consider what would happen if you were unable to work. For that reason, it’s a very popular time to take out income protection insurance. 

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How much does income protection insurance cost?

Income Protection Insurance in the UK can cost from as little as £10 per month, but most people pay between £50-£80 per month. Short term policies or those with longer deferment periods tend to be more affordable than long term or those with short waiting periods. 

The average cost of income protection insurance in the UK:

The average cost of income protection insurance in the UK is £65.

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Income protection insurance for self-employed people

The most common users of Income Protection Insurance is those that are self-employed or freelancer as they tend not to have employee benefits such as sick pay that’ll protect them if they’re unwell. Most policies are available to people that are self-employed, contracting or working freelance.

Being self-employed won’t affect the cost of your policy, but your profession, along with a number of other factors, will.

Disclaimer: This information is general and what is best for you will depend on your personal circumstances. Please speak with a financial adviser or do your own research before making a decision.

This article was written by:
Chris Steele
Founder and Editor

Chris is our resident private health insurance and healthcare expert. He has over a decade of experience writing about private medical insurance and treatment. He's Chartered Insurance Institute qualified and is regularly quoted by the national press.

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