Income protection

Introduction to income protection

Income protection insurance pays out a regular tax-free income to a claimant in the event of their being unable to work as result of serious illness or injury.

The policy is designed to provide you with a monthly income to allow you to meet all your essential commitments as well as a measure of comfort if you are struggling to make ends meet.

The maximum level of protection will represent a proportion of your regular salary so as to encourage claimants to return to work should they become fit healthy again.

Why you can't rely on the state

It is not the case that the state will provide people with enough money to get by comfortably.

Whilst the Employment and Support Allowance (ESA) provided by the government may be sufficient to help people manage in the short term, it is unlikely that it will stretch to allow them meet mortgage repayments.

You may, however, be entitled to income support from your employer. It is worth taking this into consideration when looking at alternatives as it may change your needs regarding your income protection.

Extent of cover

Unlike other protection policies, which may only provide a replacement income for a limited period of time, you can claim income protection for as long as you are unable to work due to sickness or injury and before your policy ends.

The policy will cease, however, when you cancel or miss payments and usually when you reach retirement. Regardless of whether or not you return to work, the protection will also end if you recover and are no longer incapacitated.

The maximum amount of benefit you receive will be determined by your current earnings. This is usually a maximum of 50% of your salary or around £1500 a week, although this varies between insurers.

You can also get income protection even if you do not have an income per se. However, there is normally a restriction on the level of benefits you receive, usually around £20,000 per year, although this can vary.

Income protection covers illness and injury only and will not provide cover if you are made redundant.

Income protection if you are self-employed

Income protection is also available if you are self-employed, however the level of benefits you receive are calculated differently than if you were an employee.

The amount you receieve will be determined by your share of the annual pre-tax profits.

  • Self-employed for more than 36 months – your benefits will be based on your yearly earnings based on your average yearly pre-tax profit over 3 years prior to incapacity
  • Self employed for less than 36 months – your benefits will be based on your yearly earning based on your average yearly pre-tax profit during the period of self employment prior to incapacity


People make claims for a variety of reasons, for both physical and mental conditions. Some examples may include:

  • Stress, depression
  • Musculoskeletal problems relating to bones and muscles – including back pain
  • Heart disease
  • Cancer
  • Accidental injuries – for example to the back or neck


In order to qualify for an income protection policy cover you must usually satisfy the following criteria:

  • Age between 18 and 64 years - whereby you are still working and earning an income. Insurers won’t provide cover beyond retirement age
  • Living and working in the UK – permanently living and in paid employment for at least 16 hours a week. Any less and you may qualify for unemployed income protection
  • Work is permanent – If you are in a temporary, causal or seasonal role you may not be able to apply for income protection
  • Been in employment for at least 6 months
  • Job is secure – you cannot apply for income protection if you are aware of any conditions which may affect your job security. For example, impending unemployment, job losses, company restructure or merger with another company
  • Maximum insured benefit – your monthly benefits must not exceed the insurer’s maximum proportion of your salary. Some insurers for example will only allow you to protect 50% of your annual salary
  • Medical conditions – your policy may not protect you against any accidents or sickness that occurred before you took out your cover and reoccurred during