What is income protection?

Income protection is an insurance policy that pays you a monthly amount 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. Income protection payments kick in after an agreed waiting period and, if you have a long-term policy, would keep paying until you were well enough to go back to work.

Ultimately, having an income protection policy can help you keep up with the cost of life if you’re not well enough to work. In that sense, it can offer much longer-term protection than employer or statutory sick pay, and could also mean not needing to rely on savings or others means to get by if you're too unwell to work (which you may or may not have).

What's the best income protection for me?

There are several variables that determine what's the ‘best’ income protection policy for you, but the main things to think about are having:

  • Enough cover to sufficiently meet your needs if you needed to claim
  • Monthly insurance premiums you can afford
  • An appropriate waiting period (i.e. you’d be able to support yourself financially until your payments started)

Beyond that, there are different types of income protection policies to choose from: namely short-term and long-term. Short-term only pays out for a fixed length of time (usually up to 2 or 5 years) – which 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.

How much income protection do I need?

To work out how much income protection 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 others 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 55% of your income (pre-tax).

Best income protection companies

The ‘best’ income protection 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 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 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 prices 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 Protection
£39.82 £45.33 Read our Aegon income protection review
AIG
YourLife Plan Income Protection
£32.44 £51.38 Read our AIG income protection review
Aviva
Income Protection +
£26.62 £37.56 Read our Aviva income protection review
Legal & General
Income Protection Benefit
£25.13 £33.05 Read our Legal & General income protection review
LV=
Income Protection
£27.37 £33.31 Read our LV= income protection review
Royal London
Personal Menu Plan
£26.22 £35.45 Read our Royal London income protection review
VitalityLife
Essentials Plan
£29.59 £42.69 Read our VitalityLife income protection review

Quoted on 14/02/20

Income protection price comparison based on age

The following prices 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
£35.37 £45.80 £59.83 Read our Aegon income protection review
AIG
YourLife Plan Income Protection
£28.85 £41.18 £62.13 Read our AIG income protection review
Aviva
Income Protection +
£23.47 £33.40 £51.80 Read our Aviva income protection review
Legal & General
Income Protection Benefit
£21.68 £28.47 £50.28 Read our Legal & General income protection review
LV=
Income Protection
£21.41 £30.51 £50.06 Read our LV= income protection review
Royal London
Personal Menu Plan
£22.37 £33.83 £54.55 Read our Royal London income protection review
VitalityLife
Essentials Plan
£24.74 £35.86 £60.86 Read our VitalityLife income protection review

Quoted on 14/02/20

Understanding income protection policy features

Comparing policy features is one way of telling income protection 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 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 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.

In terms of the 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.

Finding the best income protection for you


Anorak makes it easy not only to find the best income protection – but to find the right income protection 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? Well, we’ve delved into the policy details across all the major insurers’ 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.

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