Do I need income protection insurance?

Do parents really need income protection insurance?

Income protection insurance can be a financial lifeline for parents because it replaces part of your income if illness or injury stops you working for a while or permanently. For families who rely on one or two salaries to cover the mortgage, childcare and everyday bills, this cover can make the difference between keeping your home and lifestyle on track or facing difficult cutbacks. It is not essential for every parent, but it is particularly worth considering if your household would struggle to cope for more than a few months without your regular pay.

How income protection helps with family bills

Most policies pay between 50% and 70% of your usual income if you cannot work, which can cover the basics such as rent or mortgage, food, utilities and nursery or school costs, so your children’s routine is affected as little as possible.

When parents might not need this cover

Some families may decide against income protection if they already have very generous sick pay from an employer, substantial savings, or a partner whose income alone can comfortably cover all essentials over the long term.

Typical cost for mums and dads

Healthy parents in low risk jobs can sometimes find starter policies for around £5 to £10 a month, although many will pay more once they add higher cover, shorter waiting periods or extras such as inflation protection.

Key question for any parent

The simplest way to decide if income protection is worth it is to ask how long your family could realistically manage all essential bills on savings, statutory sick pay and any partner’s income if yours suddenly stopped.

Key points for busy parents

Key Points

• Income protection insurance pays a regular, tax free income if you cannot work due to illness or disability, usually between 50% and 70% of your normal take home pay.
• Policies can be short term or long term, with options that run until retirement age, which can be crucial when children are still financially dependent.
• Cover usually includes many mental health conditions, serious illnesses and musculoskeletal problems, but it normally excludes self inflicted injuries, some pre existing conditions and redundancy.
• Premiums start low for young, healthy parents in office based jobs, and the cost is affected by your health, job, lifestyle, deferred period and level of cover.
• Some parents may not need income protection if they have strong employer sick pay, big savings or a partner’s income that comfortably covers household costs.
• Income from a policy can reduce means tested benefits, so families on lower incomes need to check how both systems interact.
• Before buying, it helps to compare providers, read reviews and consider speaking to an independent insurance broker who can explain the trade offs in plain English.

Get Started

What is income protection insurance and how does it work for families?

Income protection insurance is a type of cover that pays out a regular monthly income if you cannot work because of a qualifying illness or injury. For parents, it acts like a back up salary so that the essentials for your children – housing, food, heating, school costs and transport – are still paid even if your health takes a hit. Unlike life insurance, which usually pays a one off lump sum if you die, or critical illness cover, which pays a lump sum if you develop a listed serious condition, income protection keeps paying you an income for as long as you meet the policy conditions and until the end of the term.

Most policies are linked to your earnings so you cannot insure your whole salary. In practice, many UK providers offer between 50% and 70% of your usual gross or net income. This sounds like a big drop, but once tax and National Insurance are stripped away, that monthly payout can come quite close to your usual take home pay. For most parents, having that predictable monthly amount is far easier to budget around than trying to stretch savings or rely on credit cards, especially when children’s costs only seem to move in one direction.

Another big feature of income protection is the deferred period, sometimes called the waiting period. This is how long you have to be off work before the policy starts paying. It could be anything from a few weeks to a year. Parents with good sick pay from work might pick a longer deferred period that starts when their employer’s scheme ends, which keeps premiums lower. Others, particularly the self employed or those on statutory sick pay only, might choose a shorter wait so the money arrives before savings run dry.

Once the policy starts paying out, payments usually carry on until one of three things happens: you return to work, you reach the end of the maximum claim period for that policy, or the policy itself finishes. Long term cover can, in theory, support a family from the early years of parenting right through to children finishing university if you had the misfortune of a permanent disability in your 30s or 40s.

Income protection versus PPI and other types of insurance

Income protection is often confused with payment protection insurance, but they are very different products. Payment protection insurance, or PPI, is usually linked to a particular loan, credit card or mortgage and is designed solely to cover the repayments on that specific debt for a limited period. Income protection, on the other hand, is tied to your income, not one bill, and it pays you money that you can use however your family needs, from food and fuel to nursery fees and school shoes.

For parents, that flexibility is a big deal. Children do not pause growing because a direct debit is covered, so having a policy that gives breathing space across the whole household budget is often more practical. Income protection also sits alongside life insurance and critical illness cover rather than replacing them. Life insurance supports your family if you die, while critical illness provides a lump sum if you are diagnosed with a specified serious condition. Income protection fills the gap where you are alive but too unwell to work, which is a scenario many families underestimate.

Some parents look at family income benefit as an alternative or companion to income protection. Family income benefit is a form of life insurance that pays a tax free monthly income to your dependants if you die during the policy term. It does not pay out for illness, but it can be more affordable than a large lump sum and easier to plan around. A simple approach many families consider is a mix of life insurance, family income benefit and income protection, tailored to what would happen if either parent died or became long term ill.

Types of income protection insurance parents can choose

Income protection policies come in various shapes and sizes, which is both helpful and confusing. Understanding the main options makes it easier to pick something that fits your family’s budget and risk level, rather than overpaying for bells and whistles you do not need.

Short term income protection

Short term policies usually pay out for a fixed period, such as one, two or five years, for each claim. After that, payments stop even if you are still too unwell to work. Because the insurer’s risk is capped, these policies typically have lower premiums, which can make them attractive to younger parents watching every pound. They can work well if you mainly want a buffer to get through a serious but temporary health problem, or if you already have some other safety nets in place, like strong partner income, good employer cover or sizeable savings.

Long term income protection

Long term income protection is designed to keep paying until you either go back to work, reach a set age such as 65 or 67, or the policy term ends. For families, that means continuous support through many school years and life events if a parent suffers a life changing illness or accident. Premiums are usually higher than for short term cover because the potential payout is far greater, but many parents see this as true worst case scenario protection. It can be especially reassuring for single earner households where losing that one income for good would be devastating.

Occupation based cover

Another choice is how closely the policy ties your ability to claim to your line of work. An “own occupation” policy pays out if you can no longer do your specific job. This suits parents whose skills and experience are concentrated in a particular profession, or whose family budget depends on the higher pay that job brings. Other policies may be “any occupation” or similar, meaning you only qualify if you are unable to do any work that matches your skills or experience. These tend to be cheaper but can make claims harder if the insurer believes you could, in theory, switch to a simpler role.

Premium types: guaranteed, reviewable and age banded

Premium structure is another area that affects how easy it is to plan the family budget. Guaranteed premiums stay the same throughout the policy term for the same level of cover, so parents know exactly what will go out each month. Reviewable or age banded premiums can start cheaper but go up over time, sometimes quite steeply. That might be fine if your childcare and other costs are expected to fall later, but it can cause pressure if every bill seems to climb at once. Comparing both options helps you see whether a smaller saving now is worth less certainty later.

Index linked income protection

Index linked or inflation linked policies increase your benefit each year in line with an index such as the Retail Prices Index, so the real value of your payout does not get eaten away by rising prices. This can be helpful when you have young children and are looking 20 or more years ahead. The trade off is that premiums are higher to start with and tend to rise over time. Parents who are already stretched might decide to cover a slightly lower amount but lock in guaranteed premiums instead, while others prefer the security of knowing the benefit should keep pace with living costs.

What does income protection typically cover and exclude?

Most mainstream income protection policies in the UK cover a wide range of medical issues that stop you working, including many physical illnesses, long term conditions and injuries. This often includes common problems like back pain and other musculoskeletal issues, mental health conditions such as depression, anxiety and stress related illness, and more serious diagnoses including cancer, heart disease or stroke. For parents, coverage of mental health and back problems is particularly relevant, as these are frequent reasons people need time off work during the years when work, childcare and caring responsibilities are all competing for energy.

However, policies always have exclusions and limitations. Income protection usually does not pay out for self inflicted injuries, alcohol or drug related incidents, or for illnesses that are excluded as pre existing conditions. Some policies may impose waiting periods or special terms where there is a known medical history. Another crucial point for families is that standard income protection does not cover redundancy or being let go from your job for non medical reasons. Redundancy cover is a separate product and has become less common and more restricted over time.

Claims are generally assessed based on medical evidence and your ability to perform your job as defined in the policy. That is why it is important for parents to read the wording or ask a broker to explain it, so there are no nasty surprises at the worst possible time. If a family is already dealing with a parent’s serious illness, they do not want to discover that the insurer’s definition of being unable to work is much stricter than they expected.

How much income protection do parents actually need?

Although insurers might allow you to cover up to 50% to 70% of your income, that does not mean every parent needs the maximum. A more practical starting point is to look at your essential monthly costs and build up from there. Essentials will usually include housing costs, council tax, utilities, food, transport, childcare, school related costs, debt repayments and any must keep subscriptions like broadband. Luxuries and irregular spending can often be trimmed if money is tight, but the basics for your children and home are far less flexible.

Once you have a picture of these outgoings, look at what income would still come in if you were unable to work: a partner’s salary, statutory sick pay, any employer sick pay, income from benefits, child maintenance, rental income or investments. The gap between those figures and your essentials is a good guide to how much income protection to insure. Choosing a lower benefit can significantly reduce premiums and still protect your family from the worst financial stress, particularly if you also keep a small emergency fund.

Parents also need to think about how long they would want cover to last. If children are very young and you have a large mortgage, you might want income protection that runs to normal retirement age. If teenagers are nearly independent and the mortgage is small, a shorter term might be enough. Whatever you decide, it is wise to allow for price rises, changes in childcare costs and the reality that teenagers are not usually cheaper to support than toddlers.

Questions parents can ask before choosing a level of cover

• What are our non negotiable monthly bills for the household and children?
• How many months of those bills could our savings cover if both incomes stopped?
• What employer sick pay do we actually get in writing, and for how long?
• Would specific policy exclusions be a problem given our health, hobbies or work?
• How long could we realistically cope before an insurance payout starts?
• How many years are left until our planned retirement, and how long will the children still depend on us financially?

The answers help shape not only how much income to cover, but also your chosen deferred period and term length. Parents who prefer to keep premiums low might opt for a longer waiting period that lines up with their employer sick pay and savings, while those with little or no safety net often feel more comfortable with a shorter wait.

Will income protection affect family benefits?

For parents who receive or may need to claim means tested benefits, income protection needs careful thought. The income from most personal income protection policies is tax free, which is helpful when every pound counts. However, this money can be treated as income when working out eligibility for certain benefits, which may reduce or remove payments. That does not mean income protection is a bad idea, but families on lower incomes should check how benefits and insurance interact, possibly with advice from Citizens Advice or a benefits specialist.

It can help to treat income protection as a way to secure a stable minimum standard of living that does not rely entirely on benefits, which can change with government policy. But families need to be realistic that taking out a policy might reduce their entitlement to some benefits if they ever needed to claim. Balancing this against the peace of mind of guaranteed monthly payouts is a personal decision for each household.

Who might not need income protection insurance?

Despite its advantages, income protection is not essential for every parent. Some families genuinely have enough built in protection to manage without it. For example, a household where one parent has very generous long term sick pay, perhaps paying most of their salary until retirement, might consider a separate policy unnecessary. Likewise, families with high savings or investments that could comfortably cover many years of living costs sometimes prefer to self insure and keep control of their money.

Parents nearing retirement might decide their pension income, plus any other arrangements, would be enough if illness struck, particularly if children are grown up and the mortgage is small or paid off. In other families, one partner’s income alone may more than cover essentials, so the second income is helpful but not critical. In those cases, income protection for the lower earner might be less of a priority than life cover or critical illness insurance for the main earner.

That said, it is easy to overestimate how long savings will last or underestimate daily costs with children. Anyone thinking of relying solely on savings should work through a detailed monthly budget and be honest about rising prices, the cost of teenagers and unexpected expenses like car repairs or school trips. Talking decisions through with a financial adviser or broker can help highlight blind spots before you cancel or skip cover altogether.

How much does income protection cost for parents?

The cost of income protection depends on several factors: your age, health, smoking status, job, hobbies, how much income you want to cover, the length of the policy, the deferred period and whether premiums are guaranteed or reviewable. Younger, healthy non smokers in office based roles usually pay the least, while older parents in physically demanding or higher risk jobs tend to pay more. Adding options such as index linking or shorter waiting periods pushes the price up, but they can offer added security for families.

As a rough idea, many parents might see quotes starting from around £10 to £20 per month for modest cover, with higher levels of protection and shorter deferral periods increasing premiums. It is often cheaper than people expect once they tailor the benefit to the real gap in their finances rather than insuring the maximum allowed. Comparing quotes from several insurers, ideally through an independent broker or comparison service, can save a meaningful amount over the life of the policy.

To keep costs manageable, parents often consider a few strategies: matching the deferred period to their employer sick pay or savings buffer, insuring only essential outgoings, choosing guaranteed premiums for long term certainty, and avoiding add ons they do not really need. Some insurers also offer discounts for non smokers, people who maintain a healthy BMI or those who buy cover as part of a wider protection package, although it is important to check that any bundle still represents good value.

Can parents cancel or change an income protection policy?

Most income protection policies can be cancelled at any time, but premiums already paid are not refunded and, once cancelled, you would need to apply for new cover from scratch if you later changed your mind. For parents, that usually means facing higher premiums because of age, and possibly tougher medical screening if any health issues have developed in the meantime. This is why it is worth thinking very carefully before cancelling a policy that has already been in place for years.

If the monthly cost is causing strain, speaking to the insurer or the broker who arranged the policy is often more helpful than cancelling outright. Options may include extending the deferred period, reducing the benefit amount, shortening the term, removing index linking or switching from guaranteed to reviewable premiums. Each of these has pros and cons, but they can sometimes bring premiums back within reach while still leaving meaningful protection in place for the family.

Choosing an income protection provider as a parent

Picking an income protection provider is about more than grabbing the lowest headline price. Parents typically value reliability and good customer service, because claims usually happen at stressful times when clear communication matters most. Comparing providers on financial strength, claims statistics, policy flexibility and how they treat mental health conditions can be just as important as the premium. Independent review sites and consumer organisations can give a sense of which insurers handle claims fairly and support customers well.

Working with a qualified insurance broker who understands family finances can save parents a lot of time. A good broker will ask about your children, home, savings, benefits, existing workplace cover and long term plans, then recommend a policy type, benefit level and provider that fit. They can also help with the application and point out any parts of the wording that might catch you out at claim time. Many brokers are paid by commission from insurers, so you do not always pay them directly, although it is sensible to ask how they are rewarded.

Before signing anything, parents should check practical details: the definition of incapacity, the deferred period, the maximum claim length, any exclusions or loadings, whether premiums are guaranteed or reviewable, whether the benefit is index linked and what happens if they change job or move abroad. Spending a little extra time on these questions now can mean one less headache if life takes an unexpected turn later.

Alternatives and complements to income protection for parents

Income protection is not the only way to protect a family budget. Parents who decide it is not right for them, or who want extra layers of security, can combine several other tools. Life insurance is still the cornerstone for many families, providing a lump sum or ongoing income if a parent dies. Critical illness cover can pay a lump sum on diagnosis of certain serious illnesses, which can be used to clear debt, adapt a home or fund a break from work. Family income benefit can deliver regular payments to children if a parent dies during the term, often at a lower cost than a large lump sum policy.

Outside of insurance, building an emergency savings fund, paying down high interest debts and keeping a close eye on outgoings all make families more resilient. Some parents also explore flexible working arrangements, side income streams or renting out a spare room to boost financial security. Using free guidance from services like MoneyHelper or speaking to an adviser can help parents weigh up which mix of insurance, savings and cost cutting gives the best balance between protection and affordability.

Frequently asked questions from parents

Is the income from my policy taxable?

For most personal income protection policies in the UK, the monthly benefit is paid tax free because premiums are made from income that has already been taxed. That means the amount you see quoted is usually the amount that will land in your bank account, which makes family budgeting simpler. Policies arranged through an employer can be treated differently, so it is worth checking the details if your cover comes via work.

What if I change my job or move abroad?

Insurers expect to be told if you change occupation, because a new role might be more or less risky than your old one. Moving from a desk based job to a physically demanding trade, for example, could increase your premiums or alter your terms, while switching to a safer job may have little impact. Moving abroad usually complicates things more, and many UK policies will not cover you if you are no longer resident in the UK, so parents planning a relocation should speak to their insurer well in advance.

What does making a claim typically involve for a parent?

When illness or injury means you cannot work, the first step is to contact your insurer or broker as soon as possible. They will ask you to complete a claim form and provide medical evidence from your GP or a specialist, confirming what is wrong and why it stops you doing your job. You may be asked for information about your role, earnings and sick pay. While this can feel like a lot when you are unwell and still caring for children, having paperwork such as payslips, policy documents and medical letters organised in advance can make the process smoother.

Can I hold more than one income protection policy?

It is possible to have multiple policies, for example one through an employer and one purchased personally. However, insurers usually cap the total amount you can receive across all policies at a set percentage of your income, often between 50% and 70%. When you apply for extra cover, insurers will ask about any existing policies and take them into account, so you cannot insure more than your earnings and end up better off ill than working.

Final thoughts: is income protection worth it for your family?

Income protection insurance is not the most glamorous purchase a parent will ever make, and with nursery fees, food prices and fuel costs all competing for attention, it is easy to push it down the priority list. Yet for many families, their biggest financial asset is not the house or the car, but the future income that pays for everything children need. Protecting that income, at least to a basic level, can stop a health crisis turning into a financial crisis as well.

Whether income protection is right for your household comes down to a few honest questions: how secure are your jobs, how strong are your savings, what safety nets already exist, and how would your children’s lives change if one salary disappeared for months or years. Taking a little time now to weigh up the costs and benefits, perhaps with help from an independent broker, gives parents the chance to make a calm, informed decision rather than rushing into choices when life is already stressful.

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Do I need income protection insurance?

You will probably have heard about income protection insurance but most of us don’t actually know enough about it. 

This is a one size fits all type of cover and will work for most people’s occupation and cover most of the things that might stop you from working. The facts are that income protection insurance is to replace your regular income if you can’t work due to illness or injury. 

There are lots of physical and mental problems that might prevent you from working for weeks, months, or even years. 

In this section, we try to answer your questions about do you really need income protection insurance. Getting income protection insurance can give you peace of mind and the level of cover you need to protect your family if you can’t work. 

SUMMARY: income protection insurance is possibly one of the least understood personal protection policies, but probably one of the most useful. Many of us should consider income protection but don’t because we think it’s unaffordable or won’t pay, which isn’t always true.  

What does income protection insurance do? 

Income protection insurance pays out monthly to replace your income or salary if you’re unable to work due to sickness, accident or injury. 

You’ll receive a monthly benefit which you will select when you take your cover out which can usually be up to 60% of your income (including salary, bonus, dividend etc.). This monthly payment can be used to pay for mortgage or rent, household bills and other costs of living expenses. 

Top income protection insurance claims UK: 

1. Musculoskeletal (1 in 5 claims) 
2. Fractures (1 in 5 claims) 
3. Cancer (17% of claims) 
4. Mental health problems (15% of claims) 
5. Covid-19 (4% of claims) 

*Figures reported by the insurer LV= for income protection insurance claims in 2021.

You can find out more about income protection insurance in our guide ‘Income protection insurance explained’.

Who is income protection for? 

The main purpose of income protection insurance is to make sure that you are able to continue to pay your bills if you can’t work. You can choose a short term or long term income protection policy depending on your needs and budget.

Ultimately, income protection insurance is designed for: 

• Employed workers (e.g. full-time or part-time) 
• Civil servants 
• Public sector workers 
• Self-employed 
• Company directors 
• Contractors 
• Sole traders 

Income protection is not for: 

• Unemployed (or redundancy/unemployment cover)
• Workers aged under 18 years of age 
• Workers aged over 70 years of age 

Note: you might also not be suitable for an income protection insurance policy if your occupation is high risk or if you have certain pre-existing medical conditions. 

When do I need income protection insurance? 

If you work (either employed or self-employed) and you have financial commitments then you should consider income protection insurance. Income protection covers you if you become ill or injured, and can help you pay essential bills until you can return to working as normal.

There are endless potential reasons why you might need to claim on your policy, as you can see above. Ultimately, if your doctor or GP has signed you off work for a period of time (usually between 1 month and 2 years) then you should be able to claim. 

According to Legal & General’s Deadline to the Breadline report 2022, for the average UK household: 

• £2,431 of savings 
• £610 of debt 
• 42% of employed adults would be in financial difficulty in 1 month 
• 90% were concerned about rising costs of living 

Current SSP rules in the UK (2023): 

• Employer can claim £99.35 per week 
• Payments can be claimed for 28 weeks 

You must also be eligible to claim SSP and you can check if you are on the Gov.uk website.

Note: you should carefully consider how you and your family would cope financially if you were unable to work due to sickness or accident. Some households might have savings in place or there might be other sources of income, but this isn’t true for many families. 

What are the advantages of income protection insurance? 

There are many pros and cons of income protection insurance cover, here are several of the top benefits: 

• Provides you with a monthly income if you can’t work 
• You can choose short term or long term income protection (depending on your budget)
• Will pay your bills and outgoings 
• Gives you chance to recover properly from your illness of injury 
• No unnecessary financial stress 
• Peace of mind that you have protection in place 
• Affordable monthly premiums to protect your income 
• Any pay out will be tax-free 
• You can defer the start of your claim payments to reduce costs
• Provides cover for almost any sickness or injury 
• Flexible cover options (most often 12 months to 24 months of payments)

What are the disadvantages of income protection insurance? 

There are also several key disadvantages to income protection insurance that you might also want to consider. 

• Can be expensive (especially for older people) 
• Not available to some people with certain medical conditions 
• Not available for some high risk jobs 
• Options can also be confusing 
• Won’t usually pay out for 4 weeks minimum or more (a waiting period or ‘deferred’ period)
• Age limits (18 to 70) 
• Maximum cover (usually 60% of your income) 

How can I get income protection insurance? 

You can buy income protection insurance either online or you can speak to an insurance specialist. 

You should be careful when buying income protection insurance online, especially if you don’t really understand what you need. It might be worth getting advice from an income protection insurance expert if you need help. 

Note: If standard income protection insurance is out of budget, there are other options for cover. Personal accident insurance or guaranteed sick pay can also provide you with some cover, usually for a fraction of the cost.

Resources

ABI – Payouts for bereavement, illness, and injury claims top £18.6 million a day

COVER magazine – Only 7% of UK adults have critical illness or income protection