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If you couldn’t work for six months because of illness or injury, what would actually happen to your money? For most people, the honest answer is: statutory sick pay for a bit, then a scramble. That gap — between what your employer covers and what you actually need to pay the mortgage and bills — is exactly what income protection insurance is designed to fill.
It’s one of those products that barely gets mentioned next to life insurance and critical illness cover, despite arguably mattering more for most working adults. You’re statistically far more likely to be off work for months with a bad back, long-term stress, or a slow recovery from surgery than you are to die during your working years. Yet most people have no plan for it beyond “I’ll use my savings.”
This article explains what income protection actually is, how it differs from the things people confuse it with, what it costs, and how to work out whether you genuinely need it — or whether your existing safety net already does the job.
What income protection insurance actually does
Income protection insurance pays you a regular income — usually a percentage of your normal salary, typically around 50–65% — if you can’t work due to illness or injury. It keeps paying until you either return to work, retire, recover, or reach the end of your policy term, depending on the type you choose.
This is different from most insurance in one important way: it’s not a one-off lump sum. It’s an ongoing replacement income, paid monthly, for as long as you’re unable to work — which could be months or, with some policies, years.
There are two main types:
- Short-term policies pay out for a limited period, often one or two years per claim.
- Long-term policies can pay out right up until your planned retirement age if needed, as long as you remain unable to work.
Long-term policies cost more but offer far more security if you’re dealing with a serious, prolonged condition.
How it’s different from critical illness cover and life insurance
This is where most confusion happens, so it’s worth being precise.
| Product | What it pays | When it pays | What it covers |
|---|---|---|---|
| Income protection | Regular monthly income (% of salary) | While you’re unable to work due to illness/injury | Almost any illness or injury that stops you working, including mental health and musculoskeletal issues |
| Critical illness cover | One-off lump sum | On diagnosis of a specific listed condition (e.g. certain cancers, heart attack, stroke) | Only conditions named in the policy — often narrower than people assume |
| Life insurance | One-off lump sum | On death (or terminal diagnosis, depending on policy) | Death only — it doesn’t help you if you’re alive but unable to work |
People often assume critical illness cover “has them covered” generally. It doesn’t. It only pays out for specific diagnoses listed in the policy, and many long-term absences — stress, anxiety, chronic back pain, long recovery from an operation — don’t meet that bar at all. Income protection is the only one of the three built specifically for “I’m alive, but I can’t earn.”
What you already have through work (and why it’s often not enough)
Before paying for anything, check what you’re already entitled to, because it might be more — or less — than you think.
Statutory Sick Pay (SSP) is the legal minimum most employees get: a set weekly amount, paid by your employer, for up to 28 weeks. You can check the current rate and rules on gov.uk’s statutory sick pay page. It’s modest — nowhere near a full replacement income for most people — and it stops entirely after 28 weeks with nothing to follow.
Employer sick pay schemes vary enormously. Some employers — often larger companies and the public sector — offer full pay for weeks or months, sometimes tapering down over time. Others offer nothing beyond SSP. Check your contract or staff handbook; this single document tells you more about your real risk than almost anything else.
Group income protection, provided by some employers as a workplace benefit, is different again — it’s an employer-arranged policy that tops up your income if you’re off long-term. Not everyone gets this, and it’s worth confirming with HR whether you’re covered, because many employees don’t realise they already have some protection.
The gap to look for: how many weeks of full pay do you get before it drops to SSP level or stops altogether? That gap is what personal income protection insurance is designed to cover.
Who genuinely needs it — and who probably doesn’t
Income protection isn’t something everyone needs equally. It matters most if:
- You’re self-employed or a contractor with no sick pay safety net at all
- Your employer sick pay is thin (SSP only, or drops off quickly)
- You have a mortgage or rent that depends on your income continuing
- You don’t have enough savings to cover several months of essential costs
- You’re the main or sole earner in your household
It matters less if:
- You have a generous employer sick pay scheme covering 6+ months at full or high pay
- You have substantial savings or other income (a partner’s salary, rental income) that could cover you for an extended period
- You’re close to retirement and the cost-benefit no longer stacks up over a short remaining working life
If you’re self-employed, this is worth taking seriously. There’s no employer safety net, and Universal Credit — while it exists as a backstop — is means-tested and generally far below what most people need to maintain a mortgage and normal outgoings. Check what you’d actually be entitled to via MoneyHelper’s benefits guidance before assuming it would be enough.
What it actually costs
Cost depends on your age, health, job, smoking status, how much income you want to replace, and whether you choose short-term or long-term cover. As a rough guide, many people pay somewhere in the range of £10–£50 a month, though it can be higher for older applicants, riskier occupations, or those with existing health conditions.
Two choices affect cost significantly:
Deferred period — how long you wait after becoming unable to work before payments start. A longer deferred period (say, three months rather than one month) usually means a lower premium, because it assumes you’ve got some other short-term buffer (savings, employer sick pay) to cover the gap.
Benefit amount — insuring 50% of your salary costs less than insuring 65%, obviously, but also means a bigger shortfall if you ever claim.
A sensible approach: match your deferred period to however long your employer sick pay actually lasts. If your employer pays full salary for three months, there’s little point paying for a policy that kicks in after one month — you’d be paying for overlap you don’t need.
The misconception worth clearing up: “I’ll just use my savings”
This is the most common reason people skip income protection, and it only works if the maths actually works.
Most financial guidance suggests holding an emergency fund covering three to six months of essential outgoings. That’s a sensible general buffer — but it’s designed for short-term shocks like job loss or a broken boiler, not for a serious long-term illness that could keep you out of work for a year or more.
Run the numbers honestly: if you were unable to work for 12 months, would your savings actually last that long once you’ve accounted for your mortgage or rent, bills, food, and anything else essential? For most people, the answer is no — savings run out well before recovery does, especially with slower-healing conditions or mental health conditions, which are now among the most common reasons for long-term income protection claims.
Income protection isn’t a replacement for an emergency fund. It’s what kicks in after the emergency fund would normally run dry.
How to actually check if you need it this week
You don’t need to buy anything today. You need information.
- Find your contract or staff handbook and check exactly how many weeks of full pay, reduced pay, and then SSP-only you’d get if you were off sick long-term.
- Ask HR directly whether you have any group income protection as a workplace benefit — many employees don’t realise they do.
- Add up your essential monthly outgoings — mortgage/rent, utilities, food, debt repayments, insurance — and compare that to your current savings. How many months could you actually survive?
- Identify your real gap: the point where your income from work and savings would stop covering essentials, and nothing else kicks in.
That gap — in months, and in pounds per month — is the actual problem you’re deciding whether to insure against. Everything else is detail.
The bottom line
- Income protection pays ongoing income if illness or injury stops you working — it’s not the same as critical illness cover (lump sum for specific diagnoses) or life insurance (pays on death).
- Check your employer sick pay terms first — many people already have more cover than they realise, and some have almost none.
- If you’re self-employed or have thin employer sick pay, work out your real gap in months before dismissing the idea as unnecessary.
- Match the deferred period to how long your existing safety net actually lasts, so you’re not paying for cover you don’t need.
- Don’t assume your emergency fund covers you for a serious long-term illness — run the actual numbers on how many months it would realistically last.
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