What is income protection?

Income protection is an insurance policy that pays you a monthly benefit if you’re unable to work for any medical reason. This could mean any physical or mental illness, condition or injury that leads to you being unable to work. People commonly claim for things like musculoskeletal injuries or conditions, mental health conditions, and serious illnesses like cancer.

How does income protection work?

When you buy an income protection insurance policy, you choose how much you want to be covered for (insurers will usually cover up to 60% of your salary); how long you want to be insured for; and how quickly you'd need the policy to pay out if you couldn't work (i.e. your policy's waiting period or 'deferred' period).

If you become unable to work for health reasons, your income protection insurance monthly benefit will kick in after your agreed waiting or deferred period. The longer your waiting period, the cheaper your monthly premiums be – but bear in mind that you need to be able to support yourself financially while you wait.

You can also choose between a short-term or long-term income protection insurance policy. A short-term policy would pay out for a maximum amount of time per claim – e.g. 1 or 2 years. A full-term policy would pay out for as long as you need it to – until you're well enough to go back to work, you retire, or your policy ends.

Is it the same as accident, sickness and unemployment insurance?

No, income protection insurance is not the same as accident, sickness and unemployment insurance (ASU). The main differences are in what they cover you for, how long the policies will pay out, and what kind of exclusions they have.

The obvious difference is that accident, sickness and unemployment insurance covers you if you can’t work due to illness, injury or unemployment, while income protection insurance covers you if you can’t work for any medical reason. The catch is that accident, sickness and unemployment policies tend to come with blanket exclusions, so it can be tricky to make a claim when you need to. Income protection, on the other hand, is medically underwritten when you take out the policy, so you shouldn’t encounter problems claiming if you’re honest about your health when you apply.

An ASU policy will only pay out on a short-term basis – usually 1 or 2 years – if you need to claim. Income protection insurance policies can pay out on a short-term or full-term basis. A full-term policy would pay out for as long as you need it to – until you’re well enough to go back to work, you retire, or your policy ends.

What's income protection for?

Ultimately, having an income protection insurance policy helps you keep up with the cost of life if you’re not well enough to work. It can offer much longer-term protection than sick pay, which is usually capped at a maximum number of weeks.

Having income protection also means not having to rely on savings or other means to get by if you're too unwell to work (which you may or may not have).

Are there any exclusions?

No, you can claim for any medical reason on an income protection insurance policy, so long as you've been signed off work by a medical professional and you meet the insurer's definition of incapacity.

If you disclose any existing medical conditions when you apply, this will be factored in during the underwriting process. Depending what it is and how severe it is, an exclusion might be added to your policy around this – but you'd be able to claim for any other health reason.

Income protection policies don't cover you if you lose your income for any other reason – like unemployment or redundancy.


What's the best income protection for me?

There are several variables that determine what's the ‘best’ income protection insurance policy for you. We always recommend making sure you buy:

  • Enough cover – having enough cover to pay for the things you'd need if you couldn't work is paramount; there's no point paying for cover that wouldn't sufficiently meet your needs if you need to make a claim
  • Affordable cover – being able to afford your monthly insurance premiums is crucial, so what you want/need should always be balanced with what you can afford; different policy settings and features can be tweaked to keep the cost down while making sure you still have adequate cover
  • A suitable waiting period – choosing a longer waiting period (or deferred period) can make your policy more affordable, but you need to be sure you could support yourself financially while waiting for your insurance payments to kick in

Are there different types of cover?

Yes, there a two main types of income protection policies to choose from: namely short-term income protection and long-term (or full-term) income protection.

Short-term cover only pays out for a fixed length of time (usually up to 2 or 5 years). This is why it tends to be cheaper than long-term cover, which pays out indefinitely, until you’re well enough to go back to work. Deciding which to go for is up to you and how comprehensively you’d prefer to be covered.

You can read more about short-term income protection cover here and long-term income protection cover here.

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How much income protection do I need?

To work out how much income protection insurance you need, you need to think about what would be at risk if your income was missing. Would you be able to keep up with your monthly outgoings? If you were off work for so long that your sick pay ran out, would you be able to cope financially – and do you even have sick pay? Do you have any savings or other people you could rely on – and if so, for how long?

These are the kinds of questions you need to be asking, bearing in mind that most insurers will only cover up to 60% of your income (pre-tax).

Read our guide to buying the right income protection cover here.


Best income protection companies

The ‘best’ income protection insurance company is the one that has the right policy for you. This will likely be different per person. Many people might think the ‘best’ company is the one that provides the most affordable policy, but there’s so many other factors to take into account with income protection insurance that this isn’t always the case.

It can also help to have an idea of how favourably (or not) different insurers will look on your application depending on your circumstances – including your health, lifestyle and finances. For example, one insurer might have a product better suited to self-employed people than another, and so on.

Comparing income protection insurance companies is often about finding the best value for money based on your unique circumstances. Once you’ve decided on the amount of cover you need, you can compare the cost of insuring that amount over the same period of time – but you’ll need to make sure you balance this with what features, exclusions and flexibility a policy has.

Income protection price comparison based on smoking status

The following income protection quotes are based on:

  • 30-year-old male or female office worker
  • £1,500 level income protection cover until retirement (38 years)
  • 13 week waiting period
  • Own occupation incapacity basis
Insurer/product Non-smoker Smoker Anorak review
Aegon
Personal Income Protection
£34.72 £45.01 Read our Aegon income protection review
AIG
YourLife Plan Income Protection
£34.02 £54.03 Read our AIG income protection review
Aviva
Income Protection+
£26.65 £35.17 Read our Aviva income protection review
Legal & General
Income Protection
£24.39 £32.76 Read our Legal & General income protection review
LV=
Income Protection
£27.64 £35.90 Read our LV= income protection review
Royal London
Personal Menu Plan
£25.75 £36.05 Read our Royal London income protection review
VitalityLife
Income Protection
£29.89 £43.76 Read our VitalityLife income protection review

Income protection quotes taken on 14/04/21

Income protection price comparison based on age

The following income protection quotes are based on:

  • Healthy, non-smoking male or female office worker
  • £1,500 level income protection cover until retirement
  • 13 week waiting period
  • Own occupation incapacity basis
Insurer/product 25 year old (43 years' cover) 35 year old (33 years' cover) 45 year old (23 years' cover) Anorak review
Aegon
Personal Protection
£30.51 £39.91 £47.96 Read our Aegon income protection review
AIG
YourLife Plan Income Protection
£30.25 £43.27 £61.31 Read our AIG income protection review
Aviva
Income Protection +
£22.97 £32.48 £51.61 Read our Aviva income protection review
Legal & General
Income Protection Benefit
£21.62 £27.60 £50.54 Read our Legal & General income protection review
LV=
Income Protection
£22.38 £33.72 £51.67 Read our LV= income protection review
Royal London
Personal Menu Plan
£21.35 £33.03 £58.32 Read our Royal London income protection review
VitalityLife
Income Protection
£25.01 £36.21 £66.15 Read our VitalityLife income protection review

Income protection quotes taken on 14/04/21


Understanding income protection policy features

Comparing policy features is one way of telling income protection insurance policies apart. You can look at whether a policy does or doesn’t have these features; and if they do, you can look at the particular terms of the feature per policy, because this likely to vary. We’ll explain this below.

Typical features What they mean for you
Back-to-work benefit This benefit is about going back to work after you’ve been claiming income protection. Depending on your illness or injury, it might be the case that you can go back part-time – or you can go back full-time, but only in a different role (or job) that pays less. If this is the case, you can keep claiming via this back-to-work benefit, but you’d only get paid a proportion of the income protection benefit. There may also be a maximum length of time you can claim for.
Benefit guarantee If your policy has a benefit guarantee, it means the monthly amount paid out if you need to claim will never fall below a certain amount. Most insurers will only insure up to 55% of your pre-tax income, but this guarantees a minimum payment – which is usually around £1,500/month (so long as you took out at least that amount).
Death benefit Some insurers include a death benefit in their income protection policies – which means your partner or family would receive a lump sum payout if you died while holding the policy. This is sometimes a fixed amount (usually £10,000) or a multiplication of your monthly income protection benefit (e.g. 12x).
Family carer benefit Family carer benefit might be another one to look out for – as it may be useful for you, but not all insurers offer it. For those that do, it usually means being able to make an income protection claim if your partner or child falls ill for a certain amount of time. The benefit amount and length of time you can claim this for are usually capped.
Guaranteed insurability Most income protection policies come with a guaranteed insurability feature, allowing you to increase your cover after certain life events (without medical underwriting). This usually includes things like: getting married or entering a civil partnership; becoming a parent; taking out a new mortgage or increasing the value of your mortgage; getting a significant pay rise; and so on.
Waiver of premium Lots of policies have a waiver of premium feature, a handy add-on that means you don’t have to pay your monthly income protection premiums if you’re off work for medical reasons – and therefore while you’re claiming your income protection benefit. A minimum time off work usually applies.

Will your income protection policy pay out?

The most common reason for an income protection insurance policy not paying out is because of what’s known as misrepresentation. This simply means not being accurate with the financial, health and lifestyle information you provide when you apply – particularly important in the case of income protection insurance because the basis of every claim is medical.

Another thing to bear in mind with income protection is that insurers only pay out if you meet their definition of incapacity – but this is all stated in your policy, so as long you’re familiar with everything, you shouldn’t have any problems. For more info on when an income protection insurance policy does (and doesn't) pay out, read our guide.

In terms of an income protection insurance policy not paying out because your insurer has become insolvent, you don’t need to worry. All insurers are covered by the FSCS (Financial Services Compensation Scheme), so you’re protected in that sense too.

Anorak makes it easy not only to find the best income protection insurance – but to find the right income protection cover for you. By analysing your profile, we can calculate your cover needs and quickly match you to products based on their suitability for you.

How? We’ve delved into the policy details across all the major insurers’ income protection insurance products, unpacked it all and plugged it into our online service. In other words, we’ve done all the hard work – so you don’t have to. Giving you a quick and efficient way to buy the right cover.

Good to know: Our recommendations are regulated, completely impartial – and free. And we also have a team of human advisers who can help over the phone, if you prefer.
What is income protection?
An insurance policy that pays a monthly amount if you can't work for any medical reason. It's designed to replace part of your missing income, so you'll always be able to cover the essentials, even if lose your income because of an illness or injury.
What does income protection cover?
An income protection policy covers you if you're unable to work and lose your income for medical reasons. This includes any illness or injury, physical or mental, that leads to you being signed off work by a medical professional.
What doesn't income protection cover?
Income protection won't cover you if you're not working for anything other than a medical reason – like redundancy or resignation. You won't be able to claim on your income protection unless you're signed off work by a medical professional.
How much does income protection cost?
The cost of cover is different per person because it depends on how much cover you buy, how quickly you'd need the policy to start paying out, and how much of a risk you are to insure (based on your age, health and lifestyle).
Will my income protection pay out?
Yes, if you meet what's known as your insurer's 'definition of incapacity' – in other words, you meet their criteria for being unable to work. This definition is based, among other things, on the job you do, and you can read it before buying the policy.

This guide is intended for informative purposes only and does not constitute advice.