What is income protection and who needs it?

June 17, 2020

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Most people aren’t aware of how much an illness or injury could impact their finances – especially if it left you unable to work for a long time. You might be able to tide yourself over for a while with sick pay and savings, but what if you’re still unable to work after those things run out? And what if you don’t have them in the first place?

This is where income protection, an insurance policy that pays out if you can’t work for medical reasons, can help. It pays a monthly amount into your bank account if you suffer any kind of illness or injury, be it physical or mental, that stops you from being able to work. People typically claim on their income protection policy for things like long-term back pain, serious injuries caused by accident, and depression, but also for other serious illnesses like cancer, a heart attack, or stroke. 

What does income protection cover?

Most insurers will allow you to cover 50-60% of your pre-tax salary with income protection insurance. If you need to claim on your policy, that’s the amount you’d receive monthly – and the money can be used however you need. Most people use it to help keep up with the ongoing expenses that don’t stop when you can’t work, like paying for your rent or mortgage, bills and food.

clear glass mug on three stacked books

One important thing to know about income protection is that all policies come with a ‘waiting period’. This is the amount of time you wait between becoming ill or injured and starting to receive your payments. The longer your waiting period, the cheaper your premiums will be: but remember, you’ll have to support yourself financially during that time.

How long you continue to receive your income protection payments for, meanwhile, depends on which kind of cover you buy – short-term or long-term. A short-term policy will only pay you for a fixed amount of time (usually 1, 2 or 5 years); it’s a cheaper kind of cover, but you’d need to find another way of supporting yourself if you still couldn’t work when the payments stop. A long-term policy, on the other hand, will pay you for as long as you’re too unwell to work; it’s more expensive, but gives you total peace of mind that you’d never need to be without an income because of an accident, illness or injury.

Who needs income protection?

A good way to work out whether or not you need income protection is to think about what financial commitments and dependents you have yourself, and how being off work for medical reasons, with no income coming in, would affect your ability to pay for them. Obvious triggers for buying income protection include:

  • Having financial commitments or dependents
    Do you have a mortgage? Or a partner or children who rely on your income? It’s obligations like these that could be at risk if your income was missing for a long time. Income protection reduces that risk.
  • Being self-employed
    If you’re self-employed, you usually don’t have the safety net of sick pay, so it could be even more important to have cover like income protection in place. This is because being off work for medical reasons could have even quicker, even more significant financial consequences on you if you’re self-employed.
pink mug on stacked books on a desk

As you can see, whether or not you need it very much depends on your personal circumstances, and if you’d be able to cope financially without help if a long-term illness or injury happened to you – but as with any insurance like this, it’s usually best (and most affordable) to get it in place when you’re young, fit and healthy. This helpful guide to income protection explains why.

How much does income protection cost?

Many factors affect how much income protection will cost, so it’ll vary from person to person. Some of these factors relate to the policy itself – i.e. whether or not you go for short-term cover, which only pays out for 1, 2, or 5 years per claim, or long-term cover, which pays out for as long as you’re unable to work. How much cover you want to buy, for how long, will also affect the price. Other factors relate to you, your job, your health, and lifestyle, which will all be accounted for during the insurers ‘underwriting’ process.


In many ways, income protection does what it says on the tin: protects your income – but the most important thing to remember is that it only does this if you’ve lost your income for medical reasons. It wouldn’t cover you for redundancy, for example. And while income protection might not be as well-known as something like life insurance, it’s a highly prudent kind of cover to buy, especially for someone of working age. It gives you the peace of mind that you’ll always have money coming in to help pay your bills, even if you’re too unwell to work for a long time.

9 Comments

  • Cristina Petrini June 17, 2020 at 7:26 pm

    Protecting your income is necessary in order not to squander in the face of wrong investments or choices. Very interesting article.

  • Jay Aguirre June 18, 2020 at 7:52 am

    Interesting read. I actually haven’t heard of income protection before. Since I fall into the category of self-employed, this should definitely be something I look into.

  • chad June 18, 2020 at 4:01 pm

    I’ve never heard of income protection before to be honest!! This is really great! I will explore it for sure, thank you.

  • Melissa Cushing June 18, 2020 at 4:28 pm

    This sounds like the perfect solution for many right now. I have heard of companies like this though and sounds interesting and worth looking in to. Thank you for the informative piece 🙂

  • Catherine June 18, 2020 at 5:33 pm

    Definitely something to consider and think about…I don’t think many people realize how important it is to have that extra security. Thanks for sharing!

  • Laura @ Kidlette June 18, 2020 at 7:38 pm

    Great timing, especially in light of the pandemic the last few months. Something I definitely need to consider.

  • Rosey June 19, 2020 at 2:33 am

    Being self employed has many perks for sure. There are some difficulties though, pros and cons to everything, including self-employment. Having protections in place really matters.

  • Shannon Gurnee - Redhead Mom June 19, 2020 at 7:52 am

    I hadn’t really heard much about income protection before. This is some great information. Thanks for sharing.

  • Rachel Craig June 20, 2020 at 3:49 am

    Sounds like a good thing to have. Though what are the realities of clients experiences? Have come across someone who told me they had this. Don’t know what options, terms, etc. No longer in contact :- When heard through a friend that this individual was off sick, some ill health and having medical tests. Off sick for a number of months till diagnosis and medical treatment effective. Unfortunately don’t know how Income Protection went for this individual, who was home owner, so likely mortgage and had dependent children.

    As costs, payments which add up. Value for money?

    Insurance policies generally :- Some people experience challenges when they need to claim on policy. Client in need, believe covered by policy. Yet Insurance company may challenge paying out. Insurance Company is a Business, and aim to acquire financially.

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