The main types are:
Accident and sickness cover. This covers you if you’re unable to work due to injury or illness. This can be a long or short-term policy.
Accident, sickness, and unemployment cover (ASU). Similar to accident and sickness, ASU also covers redundancy or involuntary unemployment. ASU policies are usually short term, lasting for around 12 months and aren’t tied to a specific debt.
Payment protection insurance (PPI). Designed to cover a single debt such as a mortgage, loan or credit card, PPI continues to make payments if you're unable to work. It normally covers for 12 - 18 months.
Mortgage payment protection insurance (MPPI). This is designed to continue to pay off your mortgage if you can’t work. These policies can cover your mortgage payments for 6 months to 2 years, depending on the policy.
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Income protection normally pays out around 70% of your earnings before tax. You can use your payout to cover mortgage or rent payments, bills or food, travel and other living expenses.
Accident and sickness cover generally offers short-term cover, lasting for around 12 months. However, ASU comes in 2 forms:
Short-term income protection insurance generally pays out for a shorter period, typically covering you for 1 to 2 years. But some policies could even pay out for up to 5 years.
Long-term income protection insurance usually runs for a much longer period. Normally until either you’re able to return to work, reach retirement age or until the policy term ends. You usually have to get cover for a minimum of 5 years.
You might not be covered if:
You’re fired. If you lose your job due to something like gross negligence, your redundancy policy may not pay out.
You leave your job voluntarily. If you quit your job, and don’t have another one lined up, your policy normally won’t cover you.
You’re injured due to a reckless act. If you’re unable to work due to an injury you inflicted on yourself through a reckless or negligent act, you might not be covered.
Your injuries are self-inflicted. Injuries resulting from self harm typically aren’t covered.
Your illness is a result of substance abuse. Health issues clearly relating to substance abuse may not be covered.
Depending on your policy, there may be other exclusions too - so it’s always worth checking your policy details before getting cover.
"It's important to consider whether statutory sick pay would be enough to maintain your family’s lifestyle. Factor in and additional sick pay benefits, if your employer offers them.
If you think you or your family might struggle while you're out of work then you may want to consider income protection insurance."
The cost of your policy depends on a range of factors including your:
It also depends on which one of the 3 payment types you choose:
Fixed premiums. This means the terms of the policy stay the same, unless you choose to make a change. As the policy can’t be altered by the insurer, you’ve got comfort in knowing the monthly cost will stay the same.
Reviewable premiums. This type can be changed after a set period and is likely to increase at the insurer’s discretion over the long term.
Age-related premiums. This is based on your age and goes up each year as you get older during the term of your policy. Some insurers provide a schedule with the increases throughout the term of the policy, but not all of them do.
Page last reviewed: 26 October 2023
Reviewed by: Matthew Harwood
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