Could you pay the mortgage, finance your monthly bills, or support your family without your income? For most people, the answer is ‘no’ – or 'not for very long' – which is why they choose to take out sick pay insurance for extra security.

Sick pay insurance, or income protection, is a type of cover that protects you in case you can’t work for medical reasons. If you have bills to pay, it can give you peace of mind that even if you’re unable to work, you’ll be able to get by without your salary.

It’s tempting to assume we’ll stay fit and healthy forever, but like many types of health insurance, most people often don’t realise how important income protection is until they are unable to work. To prevent this, income protection is one way of putting a plan place – so you don’t ever find yourself struggling financially because of your health.

What is income protection and how does it work?

If you’re unable to work for a prolonged period of time due to a mental or physical illness, income protection will make sure you’ve still got money coming in each month to cover your bills until you’re fit enough to return to work.

This kind of sick pay insurance pays out for any medical reason, be that physical or mental, as long as the condition has been signed off by a medical professional. Perhaps you’re out on your bike with friends and you’re involved in an accident, or you’re finding it difficult to cope with a period of high stress; in life, we never know what’s around the corner and income protection is purely a safety net should things go wrong. Some common conditions people claim for are stress, back pain and longer-term or more serious illnesses like cancer.

What's the difference between sick pay insurance and sick pay?

If you're in permanent employment, it's likely you'll get some sick pay from your employer. This could be employer sick pay – sometimes called 'contractual' or 'occupational' sick pay – or statutory sick pay, or both.

Employer sick pay usually means you’ll be paid your normal wages if you’re off sick, up to a maximum number of weeks, followed by a reduced wage up to maximum number of weeks. If you still can’t work after your employer sick pay runs out, or you're employed by don't have employer sick pay, you’ll be entitled to statutory sick pay of £95.85/week (true as of April 2021) for a maximum of 28 weeks.

Sick pay insurance is something you buy yourself, as opposed to something provided by your employer. It's designed to cover you after your sick pay runs out – or, if you're self-employed, to cover you in the absence of any sick pay at all. If you've got income protection, you can time your waiting period so it kicks in after your sick pay ends, giving you peace of mind that you'll still have money coming in even if you can't work.

What's the difference between sick pay insurance and unemployment insurance?

Sick pay insurance, or income protection, covers loss of income for any medical reason – but won’t cover you if you are unemployed. Unemployment insurance, on the other hand, only covers you if you are made redundant – not if you have to take time off sick. Some insurers offer protection against sickness and unemployment in one combined product – known as accident, sickness and unemployment insurance (ASU).

Who needs sick pay insurance?

Quite simply: anyone who’d be financially affected by loss of income for health reasons should think about income protection. This includes:

  • Couples: If you share financial commitments, like a mortgage or a monthly rent with a partner, income protection is a way to protect your shared finances.
  • Parents: We don’t need to tell you that raising kids can be expensive. If your family would struggle to get by each month without your income, taking out income protection can give you peace of mind.
  • Single parents: If you’re raising a family alone, there’s a chance your income is vital to the health and wellbeing of your child or children. Income protection means your family won’t be left with financial difficulty should you not be able to work because of your health.
  • Self-employed workers: If you’re self employed, you won’t get sick pay through your employer, making you more vulnerable if you’re unable to work. In the absence of sick pay, income protection will give you that safety net – enabling you to take time to properly recover without worrying about your finances.
Let's work out if you need cover in case of illness. First, how old are you?
  • Sick pay insurance, or income protection, covers you if you can't work because of an illness or injury
  • It's different to sick pay, which is provided by your employer if you can't work, but only up to a maximum number of weeks
  • Sick pay insurance protects you beyond your sick pay, or instead of sick pay if you don't have it in the first place
  • Anyone who'd be financially vulnerable if they lost their income should consider getting sick pay insurance in place
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.