What is income protection insurance?

How does income protection insurance work?

Income protection policies are designed to provide a monthly payment while you’re absent from work due to illness or injury. Most insurers let you cover up to 60% or 65% of your earnings before tax, often with a lower percentage on earnings above a set level, such as £60,000 a year, and a few smaller insurers allow up to 70% on policies that pay for a limited time. Your payments start after a waiting period you choose, which can be anything from the first day of your absence with a few insurers to two years.

You might wonder why you can’t claim 100% of your usual income. Insurers pay a share of your earnings, so your benefit will be lower than your income was before you stopped working. If you pay the monthly premiums yourself, you’ll already have paid income tax on that money, so the payments are normally tax-free. If your employer pays for the insurance as part of your benefits package, the payments are normally taxed as earnings, apart from any share that matches premiums you paid yourself. Insurers can also reduce your payment to allow for other income you receive while you’re off, such as sick pay from your employer, but they don’t usually deduct state benefits.

Your payment start date can be fixed to start when your sick pay ends. Some employers support you with full sick pay for some time, while others will immediately put you onto statutory sick pay, which in November 2026 is up to £123.25 a week, or 80% of your normal weekly earnings if that is lower, for up to 28 weeks.

Is income protection insurance right for you?

Income protection is worth considering if illness or injury would leave you struggling to pay your bills, because statutory sick pay lasts for up to 28 weeks and an income protection policy can replace more of your income for longer.

Income protection insurance usually pays up to 60% or 65% of your earnings before tax when you cannot work due to ill health. Most of us would struggle to pay the bills if we had to take a significant pay cut because of illness or injury. However, it’s also important to consider your options before you decide to buy income protection insurance.

Could your savings cover time off work?

If you have savings, you could rely on those to pay your bills during an absence from work. However, if your illness or injury ends up causing a lengthy absence from work, you may find that you go through your savings sooner than you might expect. It’s important to have an alternative plan in place.

Do you already have income protection through another policy?

Some insurance policies include income protection coverage which pays out in specific circumstances. For example, you may have insurance as part of your mortgage that covers your mortgage repayments if you become ill. You may also have insurance that covers outstanding loans. Whilst you may still need income protection insurance to cover your other expenses, you may be able to choose a lower level of coverage and reduce your monthly premium.

Does your employer provide you with income protection cover?

Your employer may already provide you with income protection. However, you’ll usually only benefit from this while they still employ you. It’s still worth taking out your own policy so that you’re covered even if you decide to change jobs.

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Benefits of taking out income protection insurance

An income protection insurance policy can provide you with long-term income protection that will pay out beyond the 28 weeks of statutory sick pay entitlement and for longer than other short-term income protection policies.

Paying your bills while you can’t work

Income protection insurance can help you keep paying your mortgage, rent and other essential outgoings, even if you are away from work for more than a year.

Other loans and financial commitments

You may already have some form of insurance to pay the mortgage, payment protection insurance for car loans, or other hire purchase agreements. However, if you don’t, the monthly income from your income protection policy can help you keep up the repayments, so you’re less likely to fall behind or pay extra interest.

Maintaining your quality of life

Even if you experience ill health and are limited in your day-to-day activities, your quality of life is still important, and you can use your monthly payments to invest in the things you enjoy. If your illness or injury results in a disability, you could also use the money to pay for help at home or adaptations to your home.

You’ll also be able to ensure that family life can carry on as usual. That could mean you can continue paying for your children’s activities or provide financial support to older children.

How much does income protection insurance cost?

Income protection premiums depend on several factors, and in our January 2026 quotes the cheapest policy for a non-smoking account manager earning £60,000 a year, with £2,750 a month of cover, guaranteed premiums and a 13-week wait to age 65, cost £28.05 a month at age 30 and £61.56 a month at age 50. Some factors are individual to you, and others relate to the policy terms.

For more insight into the cost of income protection insurance read our guide.

How your age affects the cost

The older you are, the higher the risk you’ll claim on the policy. That means that premiums will be higher as you get older.

How your health affects the cost

Your insurers will assess the risk that you’ll make a claim before offering you a quote. That process includes asking for details of your medical history and your lifestyle. This may mean that they’re unwilling to offer you insurance, or they may apply exclusions that mean you can’t claim if you’re away from work because of a pre-existing medical condition.

If you’re in good health, your premiums will be lower.

How your job affects the cost

If you work in a high-risk occupation, your premiums will be higher. What’s classed as a dangerous occupation can differ depending on the insurer. It’s a good idea to get a comparison quote to compare income protection insurance prices.

How your lifestyle affects the cost

Your lifestyle can impact your overall health and the likelihood that you’ll be unable to work because of an injury. Insurers will look at health factors, including whether you’re a smoker. Taking part in high-risk sports, such as rock climbing or deep sea diving, can also increase your premiums or lead the insurer to exclude that activity from your cover.

How the waiting period affects the cost

The waiting period, also known as the deferred period, is the amount of time that you’re prepared to wait between the start of your absence from work and when you want your policy to start paying. Waiting periods usually range from four weeks to 104 weeks, and a few insurers offer one week or even the first day, though usually only with premiums that rise as you get older. For example, you might receive full sick pay from your employer for a few months. Choosing a deferred period that matches that means your payments will start when your income drops. The longer the waiting time, the lower your premiums will be.

How the definition of incapacity affects your cover

The definition of incapacity decides whether your policy pays out, because insurers use different tests of what it means to be unable to work.

Own occupation

This type of cover pays out if you can’t do your normal job. It’s the most comprehensive cover available.

Suited occupation

Some policies use a wider ‘suited occupation’ test, which means they pay only if you can’t do your own job or any other job you are reasonably suited to by your education, training or experience. For example, if you have a bad back and can no longer do heavy lifting, a policy with this test might not pay out if you could switch to a desk job. Check the definition in the policy documents before you buy.

Activities of daily living

This is a more basic test that insurers usually apply only if you weren’t working, or were working part-time, just before you became unable to work. Royal London, for example, pays under its everyday tasks test if you can’t do 3 of 9 tasks without another person’s help, such as walking more than 200 metres, climbing a flight of 12 stairs or lifting a 2kg object. Check which definition applies to you before you buy.

How much income protection cover you need

The cover you need depends on your monthly outgoings and the income you would still have while you’re off work, and the higher the income you insure, the higher your premium.

You can calculate your needs by starting with your current take-home monthly pay, how much sick pay you’d receive during an absence and whether there are any benefits you could claim. It’s also important to consider whether an insurance payout would affect any means-tested benefits you currently receive.

Consider how much you’ll need to cover your monthly expenses during your absence from work. While you won’t need to pay work-related costs such as travel expenses, you might incur other costs due to illness or simply because you’re spending more time at home.

Index linking

When looking at the level of cover you’re likely to need, it’s also important to consider whether the payments will keep pace with any rise in the cost of living. Whilst this may not be relevant if you’re only away from work for a short time, an extended absence may mean you struggle to pay the bills because your monthly payout doesn’t have the same buying power.

If your policy is index-linked, your payments will increase with inflation; however, your premiums will also be higher.

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What does income protection insurance not cover?

Income protection doesn’t pay if you are made redundant, if you injure yourself on purpose, or if the insurer has excluded the condition or activity that stops you working. Checking the policy documents before you buy is essential, particularly if you have a pre-existing health condition, because the insurer may exclude it from your cover.

Policies are for people who live in the UK, and cover is limited if you move abroad: Aviva, for example, pays for a maximum of three months if you move to a country that isn’t on its list.

Examples of what policies may not pay for include:

• Injury you cause yourself on purpose
• Unemployment or redundancy
• Any condition or activity the insurer has excluded on your policy schedule
• Illness or injury caused by misusing alcohol or drugs, or while taking part in a crime
• Not following medical advice
• The normal effects of pregnancy, although some insurers still pay if complications stop you working
• A claim where you gave false or incomplete information on your application.

Are there any alternatives to income protection cover?

The main alternatives are accident, sickness and unemployment insurance and critical illness insurance, and both work differently from long-term income protection. Life insurance is different again, because it pays a lump sum if you die or are diagnosed with a terminal illness, not a monthly income if you can’t work.

Accident, sickness and unemployment insurance

Accident, sickness and unemployment cover (ASU) is a short-term policy that usually pays out for a maximum of one or two years, and it can also pay out if you become unemployed or are made redundant, which income protection insurance doesn’t. It is usually cheaper than a long-term policy, and what it pays and what it excludes depend on the insurer.

The main disadvantage is that it only suits you if you expect to be off work for a short time. Check the exclusions carefully before you buy, because a claim can be rejected if it relates to a condition the policy excludes.

ASU cover is unlikely to suit you if you’re self-employed, because the unemployment part normally depends on being made redundant, which doesn’t apply when you are your own boss.

Critical illness insurance

Critical illness cover pays a lump sum if you’re diagnosed with a serious illness. This can be ideal if you need to adapt your home or want a lump sum to invest in your family’s future. Some policies also include cover for your children at no extra cost, paying a lump sum if one of them is diagnosed with a condition the policy covers, which could help if you need to take time off work to look after them.

The main disadvantages of critical illness cover are that it only covers the illnesses listed in your policy and may only pay out once. If you recover and then have a recurrence later, you may not be able to claim again, so check how your policy works after a claim.

How to get an income protection quote

To get an income protection quote, contact us for a comparison quote and we’ll put you in touch with one of our FCA-regulated partner brokers, who we vet and monitor, to help you find the right policy. myTribe provides guidance and information to help you choose the right insurance cover for you.