Income Protection

Income protection insurance (or income protection) is a type of policy that pays out a percentage of your usual income to help replace lost earnings if you’re unable to work as a result of illness or injury.

The monthly payments you receive can be used to help cover essential costs that your income would usually cover, alleviating financial stress at an already stressful time.

 

How does income protection work?

Income protection insurance works by paying out a percentage of your usual income in the event you become unable to work due to illness or injury.

Typically, up to 70% of your usual income could be paid out, but this can vary between providers.

Rather than a lump sum pay out, you’ll receive monthly (tax-free) instalments which can help you to make ends meet while you’re unable to work.

During the application process, you’ll decide on a ‘deferred’ or ‘waiting’ period. This is the period of time after which your payments will commence.

Common waiting periods range from 4 weeks up to 12 months. If you’re still unable to work once your deferred period has come to an end, your payments will begin.

Your policy will also come with a definition of incapacity, this will outline the circumstances in which you’ll be able to claim.

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Start an Income Protection Quote

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Why do I need income protection

Being unable to work can have a big impact on your finances and it can be hard to make ends meet without your usual earnings.

Anyone who’s worried about what may happen if they were unable to work due to illness or injury may benefit from having income protection insurance in place.

In particular, you may benefit from income protection if you:

• Are self-employed

• Don’t receive full sick pay

• Don’t have personal savings

• Don’t have another source of income, (such as additional income from partner or spouse)

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How much income protection insurance do you need?

To figure out the level of income protection cover that’s right for you, start by calculating your essential monthly expenses. This ensures that, if you’re unable to work due to illness or injury, your key costs are still covered.

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Step 1: List your monthly expenses
Enter the amounts for each category:

• Rental or mortgage payments: £_____

• Bills and utilities: £_____

• Childcare costs: £_____

• Food shopping: £_____

• Loan or credit card payments: £_____

• Transportation costs: £_____

• Other monthly expenses: £_____

 

Step 2: Total your essential expenses
Add up all the amounts above to get your total monthly outgoings.

 

Step 3: Determine your cover level
Your income protection insurance should ideally cover most—or all—of this total, ensuring you can maintain your lifestyle and meet your obligations if you can’t work.

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Tip: Consider including a small buffer for unexpected expenses or future changes, like rising bills or additional childcare costs.