What is income protection insurance in the UK?

Income protection insurance is a policy that makes sure you get a regular income until you're well enough to return to work. If you get injured or fall ill and have to take sick leave, it can pay you up to 70% of your normal income until you can work again. It allows you to concentrate on your recovery, giving you the financial resilience to help cover your outgoings and provide lasting peace of mind.

Most of us take a few sick days now and then without losing any pay, but if we have to stop working for weeks or even months, it can be a very different story. If your salary is your main or only source of income, you might be disappointed by how little financial help is available. Some employers give generous packages but many will offer only the bare minimum the law requires. For the self-employed there’s even less.

Why leave it to chance?

Protecting your income now means being prepared if illness or injury strikes

How many sources of income you have

If you depend on your salary and have no other way of earning money, income protection could be the best way to avoid financial difficulties.

What kind of sick pay your employer offers

By law, your employer is obliged to pay you just £118.75 a week. Some will go much further but many will not. Check what your employer will pay you if you have to take sick leave and for how long. If your sick leave lasts 4 weeks for example, you may want to set your policy to kick in after the 4 weeks.

What options you have if you’re self employed

Self-employment has many advantages but you have no employer to help when you can’t earn. The government offers Employment and Support Allowance, but it’s only £92.05 a week. Unless you’ve built up savings specifically for an emergency, income protection could be the solution.

How much does income protection cost?

It's extremely hard to put a figure on it, but you can insure your income for as little as £5 a month. The price varies according to factors including the amount of cover you want, the maximum length of your claims period, how long you can wait between claiming and receiving your first payment. Your premiums will probably increase each year, since your risk becomes greater as you get older.

If you have dependants

If your income supports not just you but your partner, children or a loved one, losing it could have a serious impact. Income protection can ensure everyone is well looked after.

If you’re happy to spend your savings on household bills and expenses

If you’ve been able to build up your savings, maybe for a deposit or a major purchase, you may want to consider whether you would be happy using it to pay your bills.

If you decide that income protection is something you need then your next decision will be to work out your level of cover. This is the amount your insurance policy will pay out if you make a claim and it’s approved. 

When deciding the level of cover you need, you may want to think about the following:

• How much would I need per month to cover my bills and expenses? 
• How much would I like to pay per month for Income protection insurance? 
• How long would I like my cover to last? 
• How soon after I stop getting sick pay would I like my insurance to start?

Not everyone will need income protection. But at Eleos we believe everyone should know it exists and how it works.

Income protection insurance may not be a priority for you if:

• You have more than one source of income
• Your employer gives you generous sick pay 
• You’ve set aside emergency savings that you’re happy to spend

Of course, if you already have one or more of these, you can still get income protection as it gives you extra assurance knowing that incase of illness or injury, you will be covered.