INCOME PROTECTION
If your salary stopped, how long would your life keep running?
Income pays for more than the mortgage. It pays for food, energy, childcare and every ordinary commitment. Income protection can provide a regular benefit when illness or injury prevents you from working.
Most households insure the home, but not the income that pays for it
Savings and employer sick pay can provide a valuable first line of support. The problem begins when the period away from work lasts longer than the support. Income protection is designed to pay part of an insured person's income after a chosen waiting period, subject to a valid claim.
The benefit is usually paid monthly and may continue until the insured person returns to work, reaches the end of the claim period, reaches the policy end date or no longer meets the claim definition.
A good recommendation should fit around existing sick pay and savings. Choosing the right waiting period can avoid paying for cover that overlaps with employer benefits and can make the policy more affordable.
Why this matters
Nineteen per cent of UK adults in Royal London's 2026 research said they could cover their bills and living costs for one month or less if they or their partner could not work because of illness.
From 6 April 2026, eligible employees can receive Statutory Sick Pay from the first full day of sickness at 80 per cent of average weekly earnings or £123.25 a week, whichever is lower, for up to 28 weeks.
The choices that shape the policy
- Benefit amount: insurers normally limit cover to a proportion of earnings and take account of policy rules and other income.
- Deferred period: the time between becoming unable to work and the benefit starting. Common options range from weeks to many months.
- Claim period: payments may continue for a limited period for each claim or, on long term cover, potentially to the policy end date while the claim remains valid.
- Occupation definition: own occupation, suited occupation and activities based definitions set the test for a claim.
- Escalation: benefits and premiums may increase to help protect against inflation.
- Guaranteed or reviewable premiums: guaranteed premiums follow a stated basis, while reviewable premiums can change under policy rules.
Employed, self employed and company directors
An employee should first understand employer sick pay, group income protection and any benefits that continue during absence. A self employed person may have no employer sick pay and should consider how quickly savings would be used.
Company directors may consider personal income protection or an employer funded executive income protection arrangement. The owner, payer, benefit calculation and tax treatment differ, so the structure must match the employment and business position.
Support beyond the monthly payment
Many insurers provide rehabilitation, mental health, physiotherapy or return to work support. These services can be valuable, but access, eligibility and availability vary and should not be described as guaranteed unless confirmed in the policy terms.
ABI data for 2025 recorded 7,600 people returning to work with the help of income protection payments and insurer services. The policy remains insurance, not a replacement for NHS or occupational health care.
The six month gap
Illustrative Scenario
An employee receives full pay for eight weeks and half pay for a further eight weeks. Household savings could cover two more months. A long term illness would then leave the family dependent on a much lower income. A policy with a deferred period designed around the employer benefit could begin near the point the household support runs out, subject to a valid claim.
What readers need to consider
- Benefits are limited by the insurer's earnings rules and may be reduced by other income or benefits.
- The claim definition determines when the insurer considers the insured person unable to work. Own occupation wording can be particularly important.
- A short deferred period usually costs more. The period should reflect sick pay, savings and household resilience.
- Limited payment policies can be useful but may stop after a set claim period even if the insured person remains unable to work.
- Tax treatment depends on who pays the premium and who receives the benefit. Personal and employer funded arrangements differ.
Frequently Asked Questions
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Insurers normally allow a percentage of eligible earnings rather than the full amount. The calculation, maximum benefit and treatment of dividends, bonuses, benefits and other income vary.
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Many long term policies allow multiple claims during the policy term, subject to the terms. A linked claim may use special rules and a new deferred period may not always apply.
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Standard income protection covers inability to work because of illness or injury, not unemployment. Separate unemployment products may exist but have different terms and availability.
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Cover may be especially relevant because there is no employer sick pay. The insurer will need evidence of earnings and may calculate benefit using taxable profit or another stated basis.
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It usually means the claim is assessed against the insured person's ability to perform their own occupation. Definitions vary, so the contract wording must be checked.
You do not need to know which policy you need before speaking to us. Tell us what you are worried about protecting, and we will help you understand the options.
Review my income protectionERG Finance provides protection advice from across the whole of the market.
This page provides general information and does not constitute personal advice. Eligibility, underwriting, exclusions, definitions, waiting periods, claim periods and premiums vary by insurer and policy. Cover normally ends if premiums are not maintained. We will explain the features, limitations and costs of any policy we recommend. Income protection does not normally cover redundancy. Benefit levels, tax treatment and the effect of other income depend on the policy and how the cover is arranged.