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Income protection insurance

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  • Get a quote to protect you against a loss of income

  • Insure up to 70% of your gross salary free of tax

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What is income protection insurance?

Income protection is a family of insurance products designed to protect your income if you fall sick or lose your job.

Also known as loss of earnings insurance, income protection could provide you, your family or dependants with regular payments while you’re sick or unable to work. Policies typically provide you with around 70% of your earnings before tax.

Income protection insurance can help you maintain you and your family’s standard of living, as it can be used to pay your mortgage, loans, living expenses and bills.

Types of income protection insurance

Income protection isn't just one thing. It refers to a group of insurance products designed to help you stay afloat if your income is suddenly reduced.

The main types of income protection are:

  • Accident and sickness cover
  • Accident sickness and unemployment cover (ASU)
  • Payment protection insurance (PPI)
  • Mortgage payment protection insurance (MPPI)

We only compare accident and sickness cover or acident, sickness and unemployment cover.

Accident and sickness cover covers you if you’re unable to work due to injury or illness. This can be long or short term.

Accident, sickness, and unemployment cover (ASU) covers you if you’re unable to work because of a short or long-term illness, an accident, 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) is designed to cover a single debt such as a mortgage, loan or credit card. You can use this cover to continue making your repayments towards this debt if you’re unable to work. PPI normally pays out for 12 – 18 months.

Mortgage payment protection insurance (MPPI) will continue to pay off your mortgage payments if you can’t work. These policies can cover your mortgage payments for 6 months to 2 years, depending on the policy.

What does income protection cover?

Here at confused.com, we only compare quotes for accident and sickness cover, or accident, sickness and unemployment cover.

They'll each normally pay out around 70% of your earnings before tax if you become too sick to work or suffer an injury that prevents you earning.

ASU will also usually pay out if you're made unemployed through no fault of your own.

Policyholders typically use their regular pay-outs to cover:

  • Mortgage or rent payments
  • Utility bills
  • Food, travel and other living expenses

Accidents and sickness cover is generally a short term product, lasting for around 12 months.

ASU comes in two forms:

Short-term income protection insurance generally pays out for a shorter period, and will typically cover you for 1 to 2 years, although some policies will pay out for up to 5 years.

Long-term income protection insurance usually provides you with a regular income for a much longer period, normally either until you’re able to return to work, hit state retirement age or until the policy payment term ends. You’ll usually have to take out cover for a minimum of five years.

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What doesn't income protection cover?

While most policies cover you for at least sickness and injury, and others extending that to redundancy too, there are exceptions as to what will be covered.

You might not be covered if:

You’re fired If you lose your job due to something that was your fault, for example due to 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 either.

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, dangerous or negligent act, you may 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 taking out cover.

How much is income protection insurance?

The cost of your income protection insurance depends on a range of factors, including:

  • Salary
  • Occupation
  • Age
  • Health
  • Lifestyle

It also depends on the payment type you choose. There are three payment types that insurers offer. You’ll find these under the ‘premium types’ section on the result page:

  • Fixed premiums
  • Reviewable premiums
  • Age-related premiums

Fixed premiums do not change during the term of the policy, unless you choose to make a change to the policy. As the premium can’t be altered by the insurer, you’ve got comfort in knowing the monthly cost will stay the same.

Reviewable premiums can be changed after a set period and are likely to increase at the insurer’s discretion in the long term.

Age-related premiums are based on your age and will go up each year as you get older during the term of your policy. Some insurers provide a schedule with the increases to the premiums shown throughout the term of the policy, but others don’t.

It’s best to check the policy details so you can choose a payment type that suits how you want to pay, and to avoid any unpleasant surprises.

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How much income protection insurance do I need?

This depends on whether you choose a short or long-term policy, how much income you have in the first place, and how much money you need to cover your bills, mortgage and other essential outgoings if you’re unable to work due to illness or accident.

Consider these as a starting point in determining how much cover you’re likely to need. You can also choose to have the policy increase each year so that the benefit rises in line with inflation.

Insurers will typically cover up to 70% of your salary before tax. Some insurers will restrict the amount you can receive to a maximum, which motivates you to get better and return to work.

Make sure you find out what benefits you’re entitled to if you’re unable to work. Check the exact details of what your employer has to pay you and for how long. If you benefit from an Employers Group Income Protection Scheme, check how long you’ll get paid for.

Does income protection cover redundancy?

We currently compare two types of income protection - accident and sickness cover; and accident, sickness and unemployment cover.

Most accident, sickness and unemployment policies will protect you against the loss of income if you lose your job through redundancy. Accident and sickness only policies will not.

There are exceptions though: if you’re fired, rather than made redundant, things can be different and you may not be eligible for a pay-out.

If this is something that concerns you, check exactly what your policy will cover before taking out cover.

Can you get income protection insurance if you're self employed?

You might be able to get income protection insurance if you’re self-employed – policies vary, so it’s important to check your policy’s wording.

You should also make sure you answer questions about your employment status accurately when you take out income protection cover.

Is income protection taxable?

No, provided you’re paying for the insurance yourself, there’s no tax to pay on any benefits you receive. Any money you get from your income protection policy will be given to you tax-free.

Do I need income protection insurance?

If you don’t take out income protection insurance, you may find you have to rely on statutory sick pay. This is currently just £99.35 per week and is paid by your employer for up to 28 weeks.

You should consider whether statutory sick pay would be enough to maintain your family’s lifestyle.

It’s worth keeping in mind that the more dangerous your job, the more likely you are to be injured. If you’re self-employed you may also benefit from income protection as you may be vulnerable if sickness or injury prevents you from working.

What is income protection waiting time?

When filling out the income protection quote form you’ll see a question on ‘waiting time’ – this is the amount of time you must be unable to work before your monthly benefit will begin to be paid.

The longer you can wait before needing your payments, the cheaper your policy could be.

When working out your waiting time you should consider:

  • If you can’t afford a day without pay
  • If you could live solely off statutory sick pay for the 28 week period before starting your income protection payments
  • Whether you have any savings you would be willing to use for the first month or so
  • If your company offers any other sick pay benefits on top of statutory sick pay


Can you have income protection insurance and claim Universal Credit?

Yes, you can have Universal Credit and income protection insurance. However, there is an overlap as if you make a claim on your insurance policy and start receiving monthly payments, it lowers the amount of Universal Credit you’re entitled to. You can check on the Money Advice Service.

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Confused.com income protection is provided by Direct Life & Pension Services Ltd, who are authorised and regulated by the Financial Conduct Authority. Registered office; 2nd Floor Gateway 2, Holgate Park Drive, York, United Kingdom, YO26 4GB. Registered in England and Wales No 2467691. Our service is free and compares a wide range of trusted household names. Confused.com is an intermediary and receives commission from Direct Life & Pension Services Ltd which is based on a percentage of the total annual premium if you decide to buy through our website. We pride ourselves on impartiality and independence – therefore we don't promote any one insurance provider over another.