What is Income Protection?

Income protection insurance, also sometimes referred to as permanent health insurance, is a long-term insurance policy that makes sure you get a regular income until you retire or are able to return to work if you are unable to perform your job due to illness or injury. In a recent L&G survey (2020), 1 in 3 households didn't see the need for income protection and failed to associate it with the loss of income or being unable to support their family. Sadly, most people don't ever think of the consequences if they were to stop work through an illness. 

What are the benefits of income protection?

Income protection will pay a regular income if you are unable to work because of sickness or disability and will continue to pay you until you return to paid work or retirement. It covers most illnesses and injuries that will stop you working - but does not pay out if you are made redundant. It is designed to support you financially by replacing part of your income.

Income protection pays out a percentage of earnings before income tax - usually between 50% and 70% - and all payments are free of income tax.

Before taking out a policy you should consider the following:
  • What would happen if you fell ill and couldn't afford to pay your bills?
  • Do you have company or private sick pay that could cover you and how long would it last?
  • Could you survive on government benefits - Statutory Sick Pay is just £99.35 per week (as at April 2022)?
  • Can your savings support you potentially through a long period of time?
  • How much cover will you need? 

Please note: Any money you may receive from an Income Protection policy may affect your eligibility to claim certain Government means-tested benefits.