What You Need To Know About Income Protection Insurance in The UK

The 6 Things You Need To Know About Income Protection Insurance

Income Protection Insurance in the UK explained in straightforward English, we cut out the nonsense so you can understand income protection quickly.

In this article More Than Money explains Income Protection Insurance in the UK in straightforward English.

We’ve cut out all the nonsense and jargon so that you can understand income protection properly, clearly and quickly!

Let’s start at the beginning.

What Is Income Protection Insurance?

Income Protection Insurance is designed to provide you with an income in the event that you become too ill to work.

This is particularly handy if you are the main breadwinner, have a mortgage or rent to pay, or have children to provide for. 

If you are employed, Income Protection can give you a helpful cash injection when your sick pay period has ended; and if you are self-employed it can be a lifeline – especially if you have no savings to fall back on!

In this article I’m going to answer some of the most common questions surrounding Income Protection, including how it works and when you should claim.

If you were to become too ill to work, what impact would that have on your family? 

How long would it be before the bills start mounting – along with your stress levels! 

Having Income Protection can provide you with peace of mind if you become ill or injured and need to take time off work.

Often we don’t think about having to take long periods off work sick – a few days here and there at most because of a mild illness.

But, if you were to need to take longer because of an accident or a more serious illness, your employer might only pay a few weeks sick pay – after that, you’re on your own!

Scary stuff.

You might be thinking that Income Protection is for later in life when age-related conditions might be a factor, so there’s no need to bother getting a policy right now, is there?

However, the truth is that people in their 20’s and 30’s are statistically more likely to make a claim than those who are older, so it’s something worth having, whatever your age. 

Having Income Protection means that you’ll still be able to make mortgage or rent payments while you aren’t working, as well as cover your day to day living expenses meaning you can concentrate on getting better and returning to work.

income protection insurance uk, More than Money
income protection payout

How Does Income Protection Insurance Work In The UK?

Income Protection will pay out around 70% of your monthly income (before tax) if you are unable to work in your current job in the UK, and will continue up until you can either return to work, your policy ends, or you die. 

You can claim more than once, so if you return to work after making a claim and fall ill again you can still make another claim – even for the same illness. 


This option is known as ‘Full’ Income Protection.

If you’re on a budget you can choose to only receive an income for a max of 2 years per claim. 

The money will stop paying out if you are still out of work after 2 years, however this option is up to 60% cheaper than Full Income Protection. 

This option is called ‘Short’ Income Protection.

Who Should Get Income Protection Insurance In The UK?

The short answer is; anyone who works. 

It doesn’t really matter whether you have children or not (although we all understand the extra expense involved if you do!) – if taking time off work due to illness or injury means that you can’t meet your financial commitments – or eat! – then Income Protection is a must in the UK.

You’re more likely to need it if your employer doesn’t pay sick pay, or if you are self-employed.

Although having said that, even those who do receive sick pay, won’t forever, and if you have savings they’re sure to take a substantial hit if you aren’t working for any period of time.

The reality is there are very few people who could say with confidence that they don’t need a regular income (in which case they’re probably not working anyway).

Pair this with the fact that becoming ill or injured is somewhat of a lottery, and no one knows if they’re going to need Income Protection until they need it!

Perhaps you’re thinking that you’re going to take your chances and save yourself a few quid every month.

Why not!

After all, you may be young and healthy and don’t do anything particularly dangerous for a living – so what’s the harm in not having an Income Protection policy?

Well, first of all, Income Protection is a lot cheaper than you might think – particularly if you do an incredibly low-risk job like a 9-5 office job; but having said that there are risks associated with almost all jobs – possibly even yours!

When you hear, ‘dangerous occupation’, you probably think racing car driver or sword-thrower’s assistant.

What you probably don’t think of is something a little more ‘every day’, like ‘cleaner’.

BUT, there’s an element of risk in any job that involves using any kind of chemicals.

Makes sense when you think about it.

And that’s not all.

The same goes for any job where you are using any kind of machinery or requires you to operate a vehicle: plumbers, builders, forklift operators, taxi drivers…..

…and let’s not forget those who work with animals for living, such as vets or farmers…

…or those who work at heights, or underwater…the list goes on and on.

That’s not to say of course that because there is some risk involved in your job (even a small one) that your premiums will be sky high – they’re likely not – but your working environment and role will be taken into account when you apply.  

When Can I Make A Claim On My Income Protection Insurance In The UK?

With the majority of Income Protection Insurance policies you can make a claim at any point after the date the policy starts. 

When you apply you’ll be asked questions about your medical history.

Then, if the insurer is satisfied that there’s nothing to be concerned about from an insurance point of view then any time after the policy start date – even if it’s the very next day – that you were to become ill or injured and couldn’t work, you could make a claim.

If you have a pre-existing condition then the insurer may place an exclusion on the plan if they offer you cover. 

This means that if you have to take time off work because of a condition you already had when you took out your policy, you won’t be able to claim.

Of course if your company pays you some sick pay you won’t start receiving your Income Protection until that money has stopped. 

This waiting period between making your claim and receiving your money is known as the ‘deferred period’. 

The longer your deferred period, the lower your monthly premiums will be.

What Does Income Protection Insurance Cost In The UK?

Here’s a handy little table to give you a bit of an idea..

This is based on a Non-smoker with no medical conditions, low risk job and no family history receiving a monthly income of £1,000 per month until age 65 years old*

1 month deferred
Full payout
3 month deferred
Full payout
1 month deferred
Short payout (2y)
3 month deferred
Short payout (2y)
30 years old £26.27 per month £16.63 per month £13.66 per month £6.97 per month
40 years old £43.23 per month £25.63 per month £20.12 per month £11.07 per month
50 years old £67.37 per month £40.52 per month £30.84 per month £19.14 per month

Pleasantly surprised that those figures aren’t as scary as you were expecting?


What Does Income Protection Insurance Cover?

As with other types of insurance, Income Protection policies will vary slightly from provider to provider, but the majority will cover you for any illness or injury that keeps you off work.

You might find it harder (and certainly more expensive!) to get cover if you have a pre-existing medical condition that could lead to you being off sick regularly, or if you are older.

But that’s not to say you can’t get Income Protection.

If anything’s going to present any problems when it comes to almost all types of insurance it will be whether you’re a smoker or not. 

Again, probably not a huge shock to you.

The chances of a smoker being ill is much higher, and the same applies for if you’re overweight or use alcohol or drugs. 

If any of that sounds like it applies to you, you could definitely find it more difficult to get cover.


Insurance companies will normally reassess how much you’re paying for premiums if you can prove you’re making positive lifestyle changes though, so if you’re giving up smoking or starting a new fitness regime you might not have to pay higher premiums than everyone else forever!

You might be surprised to learn that Income Protection doesn’t just cover you for physical illness. 

Mental illness will affect 1 in 4 of us at some point in our lives and is one of the biggest reasons for workplace absence in the UK. 

If you have a history of mental illness, stress or depression then you might not be covered. 

But, if you suffer from mental illness after you’ve taken out your Income Protection Insurance, some Income Protection policies provide access to free counselling if needed, and will pay out until you are healthy enough to return to work. 

Well, by now we assume you are an expert on Income Protection Insurance in the UK – but, if you have any further questions, or if you want help finding the right Income Protection Insurance for you, drop us a line and we’d be happy to help. 


I started my career in finance 8 years ago. I’ve gone from advising on insurance in my home county of Kent, to working in the big city of London. I started More Than Money with my Dad and Brother, to get away from the 'sales environment'. When you're a qualified Adviser, the quality of your advice has to come first, not a 'sale on the board'. I thought, if I cant find that environment elsewhere, well I'll create it myself.

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