Income protection insurance is a pivotal safety net for many UK residents, providing a critical financial buffer in the event of illness or injury that prevents one from working.

This type of insurance ensures that policyholders continue to receive a portion of their income, helping them to meet their financial commitments during periods of health-related work absences.

Here, we look into the specifics of income protection policies, their benefits, and who stands to gain the most from having such coverage.

The Mechanics of Income Protection Insurance

Income protection insurance is designed to replace a percentage of an individual's income if they are unable to work due to illness or injury.

Typically, this percentage ranges between 50% and 70% of pre-tax salary, with many policies capping cover at around 60% to 65%. The policy pays out after a predetermined waiting period, known as the deferred period, which can range from 4 weeks to 12 months. A common deferred period is 26 weeks, especially for those with employer sick pay covering this time frame.

Payments continue until the policyholder returns to work, reaches the end of the agreed claim period, or attains the policy’s maximum age, often aligned with retirement age.

Unlike some other insurance products, income protection policies are not restricted to a set list of conditions. 

They usually cover a broad range of illnesses and injuries, provided the policyholder is medically certified as unfit to work in accordance with the policy’s definition of incapacity (e.g. ‘own occupation’ or ‘suited occupation’).

Who Benefits from Income Protection Policies?

Income protection insurance can be particularly beneficial for several demographics within the UK, ensuring financial stability during challenging times.

Employees and Self-Employed Individuals

Employees who do not have substantial sick pay provisions through their employer are prime candidates for income protection insurance. Many employers only offer Statutory Sick Pay (SSP), which is currently £118.75 per week (as of 2025), and is only paid for up to 28 weeks. This is unlikely to cover regular household outgoings.

Self-employed individuals, who are not entitled to SSP or employer sick pay, are especially vulnerable and can greatly benefit from income protection.

For both groups, having a dependable source of income during periods of illness or injury is essential to maintaining their standard of living and meeting ongoing financial obligations.

Those with Financial Dependents

Individuals with financial dependents, such as children, spouses, or elderly relatives, often have a heightened need for income protection.

A sudden loss of income can disrupt the entire household, potentially impacting mortgage or rent payments, utility bills, and day-to-day living costs. Income protection provides a vital safeguard by helping to ensure that dependents remain financially supported during periods when the primary earner is unable to work.

Homeowners with Mortgages

Homeowners, particularly those with long-term mortgage commitments, are another group that stands to benefit from income protection insurance.

Mortgage payments are typically among the largest monthly expenses. Income protection can provide ongoing support, ensuring these payments can continue without interruption and reducing the risk of arrears or repossession in the event of long-term sickness or injury.

Why Opt for Income Protection Insurance?

Income protection insurance offers several compelling advantages that underscore its value as part of a financial resilience plan.

Comprehensive Coverage

Unlike critical illness cover, which pays a one-off lump sum for specific listed conditions, income protection pays a regular income for as long as you are unable to work and your claim remains valid. This ensures more consistent financial support, even for illnesses or injuries that may not qualify under critical illness definitions.

Flexibility in Claims

Income protection policies allow for multiple claims over the life of the policy, provided each claim meets the policy’s definition of incapacity. This flexibility makes it a valuable solution for individuals with chronic or recurring health conditions that may cause repeated absences from work.

Expert Insight – Mark Cornes, Mortgage Broker, Financial Adviser & Protection Adviser in Bristol, said:

“Ultimately, income protection insurance offers invaluable peace of mind. Knowing that a substantial portion of one’s income is secured allows individuals to focus on their recovery without the added stress of financial instability. 

This can have a positive impact on their overall well-being and speed up the recovery process. Engaging with a professional protection adviser is important to ensure the right policy is selected for your needs. We recommend speaking to a qualified adviser to determine which policy best suits your personal financial circumstances.”

In Summary

Income protection insurance is a vital component of sound financial planning in the UK. It provides essential cover for employees, self-employed individuals, homeowners with mortgages, and anyone with financial dependents.

By replacing a portion of your income if you’re unable to work due to illness or injury, income protection insurance helps maintain your financial commitments and lifestyle.

With recent regulatory emphasis from the Financial Conduct Authority on ensuring protection products offer fair value and clear benefits under the Consumer Duty, now is an ideal time to review whether income protection insurance should form part of your financial strategy.

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Source: https://www.gov.uk/employers-sick-pay/entitlement

Thomas Oliver UK LLP is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited which is authorised and regulated by the Financial Conduct Authority.

Approved by The Openwork Partnership on 20/08/2025.