Compare the Best Income Protection Insurance
Income protection insurance provides extra financial security for your family by paying out regular monthly sums if you can’t work because of your health. Income protection is often cheaper than you’d imagine, and the payments can make a big difference if you need time off work to recover from an illness or injury.
As parents, we all worry about the best ways to support our children and what we would do if we couldn’t pay our bills. Income protection acts as a safety net, helping with important bills like mortgage or rent payments until you’re back on your feet.
Earlier this year, the Association of British Insurers reported that sales of income protection insurance had hit a record high in the UK. In 2023, over 247,000 people bought an income protection policy to protect themselves and their families.
There are lots of options for income protection insurance and this can make it tricky to work out which insurer and policy is right for you. If you’re thinking about getting income protection, you can contact our insurance experts for free and impartial advice by CLICKING HERE or calling 0800 009 6559.
What is income protection insurance?
Income protection insurance is a policy that pays out regularly if you are unable to work due to illness or injuries. If a doctor signs you off work for four weeks or longer, you can claim on your income protection insurance policy. Your insurance company will pay you a tax-free lump sum every month to replace your usual wages until you can return to work.
You won’t be able to cover 100% of your usual income but can often cover around 60% to 70% of your typical salary. This money could make a massive difference to your family, especially if you’re the sole breadwinner, or your family relies heavily on your income.
Key facts about income protection insurance:
- All policies will include a ‘deferred’ or waiting period between starting sick leave and your policy starting to pay out (usually 4 weeks at minimum).
- Both employed and self-employed workers can apply for income protection insurance.
- Many of the UK’s top insurance companies offer income protection insurance, including popular insurers like Vitality and specialist insurers like The Exeter.
- Most policies only cover sickness absence and won’t pay out if you’re not working for other reasons (e.g. being made redundant).
Most parents will take out short-term income protection insurance, which pays out to support you for up to two years if a doctor signs you off work. Another option is long-term income protection insurance, which can pay out until retirement age if needed.
What does an income protection policy cover?
One of the best things about income protection insurance is that it will pay out for most illnesses or injuries that prevent you from working as normal. You should be covered for most situations, but insurance companies can add an ‘exclusion’ to your policy.
An exclusion is something that you can’t claim for, such as a pre-existing condition that you already had when you bought the policy. There are strict rules for income protection insurance, and you can’t buy a policy and then claim if you are already off work due to illness.
A lot of people get confused between income protection insurance and critical illness insurance. Critical illness insurance will pay out one cash lump sum if you’re diagnosed with a serious illness. Income protection insurance pays out regular monthly sums until you can either return to work or retire or your policy term ends.
Do I need income protection insurance?
The key reason to buy income protection insurance is to ensure that you can always pay your bills even if you are too unwell to work. This is especially important if you have children or other financial dependents who rely on you to pay the bills every month.
Most workers can buy income protection insurance, and these policies have been designed for:
- Full-time employed workers
- Part-time employed workers
- Self-employed workers
- Contractors
- Sole traders
- Limited company directors
It is up to you to decide if income protection insurance is something that you need and if the premiums are affordable for you. It’s a good idea to consider your usual monthly expenses and how you would pay for these if you couldn’t work.
Many workers are happy to rely on Statutory Sick Pay or workplace sick pay schemes, but this may not offer enough support during long-term sickness absences.
How much is income protection per month?
The price of income protection insurance is always based on your own circumstances, so there isn’t one set price for these policies. There are a few key things that will affect the price of all income protection insurance policies.
- The insurance company: Prices can vary significantly between insurers, so it’s always worth shopping around to find the best quotes.
- Your age: Age affects the price of most insurance policies including other popular policies like life insurance and health insurance.
- Your job role (occupation): Your exact job role can affect how much your policy costs, especially if the insurers considers your job to be ‘high risk’ for injury or illness.
- Deferred period: The waiting period before your claim pay outs start can have a big impact on the cost of your policy. If you could rely on savings or other income for a while, it can be much cheaper to choose a longer deferred period.
- Your health: The insurer will always ask about your health and lifestyle to assess how likely you are to claim. The price of cover can be higher if you have a high risk hobby or a chronic medical condition.
- Level of cover: As you might expect, you will have to pay more if you want a higher level of protection. For example, you could pay much less if you only cover 50% of your typical pre-tax income compared to 60% or 70%.
You should think about how much you can afford to pay and if you have any savings or other forms of income to fall back on if needed. You may also be able to claim on other policies like critical illness insurance if you are off work due to a new diagnosis.
Read our full guide to ‘How much is income protection insurance?‘ for more tips and information about how to save money on income protection insurance.
What are the main types of income protection?
There are 4 main types of income protection insurance that offer peace of mind and financial security for your family. Each of these policies works slightly differently, which our MPO financial experts have explained below.
- Short term income protection insurance is one of the most popular income protection policies. It is cheaper than long term income protection insurance but will still pay out for up to two years in most cases.
- Long term income protection insurance Is the most comprehensive type of income protection insurance. These policies provide the highest level of cover and can pay out for decades if needed. These policies will usually be the most expensive, so you should consider whether you really need this level of cover.
- Personal accident insurance is one of the cheapest types of income protection insurance with policy prices starting at less than £10 per month. These policies won’t pay out a regular income and only pay out a cash sum for accidental injuries and hospitalisation.
- Guaranteed sick pay is another low-cost option but provides a lot less coverage than standard income protection insurance. These policies will only pay for up to 6 months maximum, so they won’t be ideal if you are worried about long term sick leave.
