Income protection insurance is one of those financial products that most people know they should have, but often overlook until it’s too late. It’s the safety net that catches you when illness or injury prevents you from working yet according to industry figures, fewer than 10% of UK workers have this vital cover in place.
If you’re a working professional in the UK, particularly someone whose income depends on your ability to show up and perform your job, this guide will walk you through everything you need to know about income protection insurance: what it is, how it works, what it costs, and whether you actually need it.
What Is Income Protection Insurance?
Income protection insurance is a policy that pays you a regular tax-free monthly income if you’re unable to work due to illness or injury. Unlike other types of insurance that pay out a lump sum, income protection provides ongoing financial support for as long as you’re off work, up to a specified period, often until you recover, retire, or reach the end of your policy term.
Think of it as a replacement salary when you can’t earn one yourself. If you were to fall seriously ill or suffer an injury that stopped you working for months or even years, income protection would step in to cover your bills, mortgage, and living expenses while you focus on recovery.
How Does Income Protection Insurance Work?
When you take out an income protection policy, you’ll choose:
The amount of cover: Typically between 50% and 70% of your gross annual income. Insurers cap this to ensure there’s still an incentive to return to work when you’re able.
The deferred period: This is how long you wait after becoming unable to work before the policy starts paying out. Common options include 4 weeks, 13 weeks, 26 weeks, or 52 weeks. The longer the deferred period, the lower your premiums.
The benefit period: How long the policy will pay out for. This could be until a specific age (commonly retirement age), for a set number of years (such as 2 or 5 years), or until you return to work.
Own occupation or any occupation cover: ‘Own occupation’ pays out if you can’t do your specific job, while ‘any occupation’ only pays if you can’t do any job suited to your skills and experience. Own occupation is significantly better protection but costs more.
If you make a claim and it’s accepted, you’ll receive regular monthly payments directly to your bank account, allowing you to maintain your lifestyle and meet your financial commitments while you’re recovering.
What Does Income Protection Insurance Cover?
Income protection insurance covers a wide range of illnesses and injuries that prevent you from working, including:
- Musculoskeletal conditions: Back pain, joint problems, repetitive strain injuries
- Mental health conditions: Depression, anxiety, stress, burnout
- Cancer: All forms of cancer requiring treatment
- Cardiovascular conditions: Heart attacks, strokes, heart disease
- Neurological conditions: Multiple sclerosis, Parkinson’s disease, chronic fatigue syndrome
- Serious accidents: Resulting in broken bones, head injuries, or other trauma
- Long-term illnesses: Diabetes complications, chronic conditions that prevent work
The key point is that the condition must prevent you from working, not just exist. You need to demonstrate that your illness or injury stops you from performing the duties of your occupation.
What Income Protection Doesn’t Cover
Like all insurance, income protection has exclusions. These typically include:
- Pre-existing medical conditions (unless specifically declared and accepted)
- Unemployment or redundancy (unless you have specific unemployment cover)
- Elective cosmetic procedures
- Self-inflicted injuries
- Criminal activities
- Normal pregnancy (though pregnancy complications may be covered)
Every policy is different, so it’s essential to read the terms and conditions carefully or speak with an expert adviser who can explain exactly what you’re covered for.
How Much Does Income Protection Insurance Cost?
The cost of income protection insurance varies significantly based on several factors:
Your age: Premiums increase with age as the risk of illness rises.
Your occupation: Higher-risk jobs (manual labour, for example) cost more than lower-risk office-based roles.
Your health and lifestyle: Smokers pay more, as do people with pre-existing health conditions. Your weight, alcohol consumption, and dangerous hobbies can also affect premiums.
The amount of cover: The more income you want to protect, the higher the premium.
The deferred period: Shorter waiting periods mean higher premiums. If you can afford to wait longer before receiving benefits (because you have savings or employer sick pay), you’ll pay less.
The benefit period: Longer benefit periods cost more than shorter ones.
Own vs any occupation: Own occupation cover is more expensive but provides far superior protection.
As a rough guide, income protection insurance typically costs between 1% and 3% of your gross annual income. For example, if you earn £50,000 per year and want to protect £30,000 (60%) of that income, you might pay between £50 and £150 per month depending on the factors above.
While this might seem expensive, consider what would happen to your finances if you couldn’t work for six months, a year, or longer. For most people, losing their income would be financially devastating within weeks.
Do I Need Income Protection Insurance?
The simple answer: if you rely on your income to pay your bills, you need income protection insurance.
Consider these questions:
- Do you have a mortgage or rent to pay?
- Do you have dependents who rely on your income?
- Could you maintain your current lifestyle for 3 to 6 months without earning?
- Do you have sufficient savings to cover extended periods off work?
- Does your employer provide long-term sick pay?
If you answered ‘no’ to most of these questions, income protection should be a priority. Even if you have some employer sick pay, most schemes only cover a few months at full pay before dropping to statutory sick pay of just £116.75 per week (as of 2024/25), hardly enough to cover a mortgage and living expenses.
Income Protection Insurance vs Employer Sick Pay
Many UK workers assume their employer’s sick pay scheme is adequate protection. While employer sick pay is valuable, it’s often insufficient for long-term illness.
A typical employer sick pay scheme might offer:
- Full pay for 1 to 3 months
- Half pay for 1 to 3 months
- Then dropping to statutory sick pay or nothing
If you’re off work for a year due to a serious illness, you could find yourself with no income after just six months. Income protection fills this gap, providing benefits for years if necessary, often until retirement age.
Income Protection vs Critical Illness Cover
Income protection and critical illness insurance are often confused, but they serve different purposes:
Critical illness cover pays a one-off lump sum if you’re diagnosed with a specified serious illness like cancer, heart attack, or stroke. It’s designed to help with major life changes and doesn’t depend on being unable to work.
Income protection insurance pays a regular monthly income if you can’t work due to any illness or injury, not just specific conditions. It continues paying for as long as you’re unable to work (up to your benefit period).
Both have value, but income protection is generally more comprehensive because:
- Mental health conditions and musculoskeletal problems (the two biggest causes of long-term absence from work) are covered by income protection but often not by critical illness policies
- You don’t need a specific diagnosis, you just need to be unable to work
- It provides ongoing support rather than a one-time payment
Many financial planners recommend income protection as the foundation of your financial protection strategy, with critical illness cover as an additional layer if budget allows.
How to Choose the Right Income Protection Policy
Choosing income protection insurance requires careful consideration of several key factors:
1. Own Occupation vs Any Occupation
This is arguably the most important decision. Own occupation cover pays out if you can’t perform your specific job, even if you could theoretically do something else. Any occupation only pays if you literally cannot do any job suited to your education, training, and experience.
For professionals with specialised skills (doctors, dentists, surgeons, lawyers, architects) own occupation cover is essential. A surgeon who loses manual dexterity could no longer operate, but might theoretically be able to do administrative medical work. Any occupation cover would potentially refuse a claim; own occupation would pay out.
The premium difference is significant, but for high earners with specialised skills, own occupation cover is non-negotiable.
2. Deferred Period
Match your deferred period to your financial resilience:
- If you have generous employer sick pay for 6 months, consider a 26-week deferred period
- If you have emergency savings covering 3 months of expenses, a 13-week deferred period makes sense
- If you’re self-employed with no sick pay, a shorter 4-week period provides faster support but costs more
The sweet spot for most people is 13 to 26 weeks, long enough to keep premiums reasonable, but short enough to provide meaningful protection.
3. Benefit Period
For maximum security, choose a benefit period that runs to your planned retirement age. This ensures you’re protected no matter how long you’re unable to work.
Shorter benefit periods (2 or 5 years) reduce premiums but leave you exposed if you suffer a long-term condition. Given that the average income protection claim lasts around 5 to 7 years, a policy that only pays for 2 years might not be adequate.
4. Level vs Increasing Cover
Level cover pays the same amount throughout the claim, while increasing cover rises annually (usually with inflation).
Increasing cover is more expensive but protects your purchasing power if you’re off work for many years. For younger professionals with decades until retirement, increasing cover is worth considering.
5. Guaranteed vs Reviewable Premiums
Guaranteed premiums stay the same for the life of the policy (except for increases if you have an escalating premium option). Reviewable premiums can be increased by the insurer based on their claims experience.
Guaranteed premiums offer certainty and are generally recommended, even though they cost slightly more initially.
Income Protection for Healthcare Professionals
If you’re a doctor, dentist, nurse, allied health professional, or other healthcare worker in the UK, income protection insurance is particularly crucial, and you have access to specialist policies designed specifically for your profession.
Healthcare professionals face unique risks:
- High-value skills: Your ability to practice depends on physical dexterity, mental acuity, and professional registration. An injury to your hands, back problems from long hours, or stress-related mental health issues could end your career.
- Limited employer sick pay: While NHS sick pay schemes are better than many private sector arrangements, they still only provide full pay for limited periods. After six months of absence, you could be on half pay or even statutory sick pay.
- Specialised income: A consultant surgeon earning £100,000+ per year cannot easily replace that income in another field. Generic income protection might not adequately protect your specific earning capacity.
- Professional reputation: Own occupation cover is essential for healthcare professionals because your specific role matters. A surgeon who develops tremor, a dentist with repetitive strain injury, or an anaesthetist with back pain might be unable to continue in their specialty even if they could theoretically do other medical work.
Specialist income protection for healthcare professionals offers:
- Enhanced own occupation definitions specific to medical specialties
- Higher cover amounts (up to 80% of income in some cases rather than the standard 60% to 70%)
- Better terms for mental health claims (crucial given the high rates of burnout in healthcare)
- Faster claims processes with medical expertise
- Preferential premium rates negotiated specifically for healthcare workers
Why Speak with a Specialist Adviser?
Income protection is complex, and the wrong policy could leave you financially exposed when you most need support. For healthcare professionals, the stakes are even higher given your specialist earning capacity and the physical and mental demands of your work.
Affinity Advice specialises in income protection for UK healthcare professionals, including doctors, dentists, nurses, and allied health professionals. We understand the unique challenges you face and have access to specialist products and preferential rates not available to the general public.
Our expert advisers will:
- Analyse your specific circumstances, including NHS pension and sick pay entitlements
- Recommend the most appropriate policy structure for your specialty
- Access exclusive rates and enhanced cover options for healthcare professionals
- Handle the entire application process, including medical underwriting
- Provide ongoing support if you ever need to claim
Common Questions About Income Protection Insurance
Can I get income protection if I’m self-employed?
Yes. Self-employed income protection works the same way but typically requires proof of earnings through tax returns or accounts. The deferred period is particularly important for self-employed workers who have no employer sick pay to fall back on.
Will income protection cover me if I have a pre-existing condition?
Possibly. You must declare all pre-existing conditions when applying. The insurer may exclude that specific condition, apply a premium loading, or (if the condition is well-managed) accept you on standard terms. Failure to declare pre-existing conditions could invalidate your entire policy.
Can I claim on income protection if I’m working part-time?
Most policies pay out based on proportionate earnings loss. If you can only work part-time due to illness, you’d receive a proportionate benefit. Some policies include “proportionate benefit” or “rehabilitation benefit” clauses specifically for this scenario.
Is income protection insurance tax-deductible?
Premiums for personal income protection policies are not tax-deductible. However, any benefits you receive are paid tax-free, which is a significant advantage.
How long does an income protection claim take?
Once you’ve completed the deferred period, claims typically take 2 to 4 weeks to assess and start paying. Having a specialist adviser manage your claim can significantly speed up this process.
Can I have multiple income protection policies?
Yes, but the total insured amount across all policies cannot exceed around 70% to 80% of your gross income. Insurers coordinate benefits to prevent over-insurance.
Taking the Next Step
Income protection insurance is one of the most valuable yet underutilised financial products in the UK. For working professionals, especially those with mortgages, dependents, or specialist skills, it’s the difference between financial stability and potential catastrophe if serious illness or injury strikes.
The key is choosing the right policy structure for your circumstances and ensuring you have adequate cover to maintain your lifestyle if you can’t work. This isn’t a decision to rush or to make based solely on price comparison websites, which often don’t show the specialist policies available to certain professions.
Whether you’re a healthcare professional looking for specialist cover or a working professional wanting to protect your income, taking action today ensures you and your family are protected tomorrow.
The cost of income protection is small compared to the value of what it protects: your ability to pay your bills, keep your home, and maintain your quality of life no matter what health challenges you face.
For healthcare professionals: Your specialist skills, high earning capacity, and the unique demands of your work require specialist protection. Get in touch with Affinity Advice to access expert advice and preferential rates designed specifically for doctors, dentists, nurses, and allied health professionals. Speak with a specialist adviser or access exclusive healthcare professional rates today.
For everyone else, don’t leave protecting your income to chance. Research your options, compare policies carefully, and consider speaking with a qualified financial adviser who can guide you through the complexities of income protection insurance.
Your future self will thank you.
