Income protection insurance UK: What it is, how it works and costs explained
Income protection insurance can provide financial support when you can’t work due to illness or injury. In this guide we look at what income protection insurance is, how it works, who might need it and how much cover costs.
What is income protection?
Income protection is an insurance that can pay a monthly amount to replace some of your income if you become ill or get injured and can no longer work. It can replace up to 60% of your salary. This can help meet your living expenses, such as rent or mortgage payments, and utility bills. Plus, the payments are usually tax-free, so you typically don’t need to pay income tax on them. Tax treatment depends on how premiums are paid and individual circumstances and may change.
How does income protection work in the UK?
Applying for cover
When you apply for income protection insurance, you’ll need to provide details about your health, lifestyle and occupation. You’ll also need to decide how you want to set up your policy. So, you’ll be asked about:
- Monthly payment amount. You won’t be able to insure yourself for your full salary, but you can usually expect up to a maximum of 60% of your gross salary, subject to insurer limits, depending on how much you earn.
- Deferred period. This is the time you have to wait before your payments start after an illness or accident. You can usually choose from 1, 3, 6 or 12 months. Generally, the longer your deferred period the cheaper your cover.
- Payment duration. This is how long you want your income protection payments to be made. Short-term payments can be made for a year or two. And long-term payments made until you return to work or retire.
- Optional extras. Such as waiver of premium or indexation.
Underwriting
The insurer will assess the information you provide on the application form and decide if they can insure you for the amount you’ve chosen. Applications are individually assessed and may be accepted with exclusions, higher premiums (for example, due to health or occupation), or declined. If you have a complicated medical history or dangerous occupation, you may need to pay more for your cover.
Paying premiums
Once you set up your income protection plan, you’ll start paying a monthly fee called a premium. You need to pay this premium for as long as you want the plan to last.
Making a claim
When you’re injured or become ill and can no longer work, let the insurer know. To claim, you must meet your policy’s definition of incapacity. Policies can use different definitions (for example, based on whether you can do your own job or another type of work), so it’s important to check the definition in your policy documents.
If your claim is accepted, you’ll receive a monthly payment until you return to work, retire, die, or the policy ends – whichever comes first, provided you continue to meet the policy’s definition of incapacity. If you return to work but become incapacitated again, you can make another claim as long as the plan is still in place.
With Vitality, you can also access a panel of support services to help your recovery when you claim. This includes physio, mental health therapy, neurological physiotherapy and cancer support. Plus, we’ll boost your income by up to 20% for six months if you look after your health with the Vitality Programme.
What does income protection insurance cover?
Income protection insurance can cover any illness or injury that prevents you from working, subject to policy terms and exclusions. Illustrative examples would be things like:
- broken bones
- musculoskeletal injuries
- mental health conditions
- chronic illnesses, like cancer, stroke and heart disease
Income protection insurance in the UK specifically covers health-related problems. Income protection does not cover redundancy, which is an employment issue.
Do I need an income protection plan?
Income protection replaces some of your income when you’re unable to work because of an illness or injury. So, if you depend on your income to pay your bills, it could be worth considering. Especially if you:
- Are self-employed. With no employer to provide sick pay, do you have enough savings to pay for your essential outgoings until you can go back to work? If not, income protection insurance could bridge the gap.
- Have financial dependents. If your partner or children rely on your salary, income protection insurance can help to take care of them while you’re getting better.
- Want long-term coverage. Even if your employer provides sick pay, it may only last for a few months. Income protection provides cover until you return to work or retire.
- Have outstanding debt. Maintaining your regular income with an income protection payout means you can continue to pay off any credit cards or loans. Otherwise, you may have to use up your savings to keep on top of payments.
- Have limited savings. If you’ve got less than six months’ worth of wages as savings then income protection insurance can provide reassurance if you become ill or injured.
- Have a demanding job. With a physically demanding or stressful job, the chances are you may need to take time off work at some point. Income protection insurance pays out for both musculoskeletal and mental health conditions that prevent you from working, subject to your policy’s definition of incapacity.
What are the different types of income protection?
There are two main types of income protection insurance in the UK – short-term and long-term.
Short-term income protection pays out for a limited period, usually between 12 and 24 months for each claim. After this period, payments stop. You may be able to make a new claim in the future if you return to work and later become unable to work again, subject to your policy.
Long-term income protection is also known as long-term sickness insurance. It covers you to the end of the term of the plan. This is usually set at retirement.
| Long-term income protection | Short-term income protection | |
|---|---|---|
| What it does | Provides a monthly tax-free payout to replace your lost income if you’re unable to work due to illness or injury. | Provides a monthly tax-free payout to replace your lost income if you’re unable to work due to illness or injury. |
| Duration | Payments are made until you return to work, retire, die, or the policy ends – whichever comes first. | Usually 1-2 years. |
| When it pays out | After your chosen deferred period. This can be from 1-12 months. | After a deferred period of 1-4 weeks. |
| Cost of cover | Depends on personal factors, such as your age, occupation, health and lifestyle. | Usually lower than long-term protection as the term is limited. |
| Suitable for | People who want to protect their lifestyle in the long-term if unable to work. Self-employed with no sick pay support. Home owners and families who rely on one income. |
People who need immediate financial support in the short-term. Providing short-term sick pay and cover for less serious injuries. People on limited budget. |
Exact terms vary by insurer and policy.
Self-employed income protection
Freelancers, contractors and small business owners don’t typically have employer sick pay, so any time off work can have an immediate impact on income.
Income protection can provide a monthly benefit if illness or injury prevents you from working. The amount you can insure is based on your earnings and is subject to policy terms and limits. You can choose when payments start and how long they last.
Redundancy cover
Redundancy or unemployment insurance are separate products to income protection that may provide short-term payments if you are made redundant, subject to their own terms and conditions.
A possible example might be if your employer restructures, and your role is no longer needed, redundancy insurance can pay the bills while you look for a new role.
You won't receive a payout if you choose to take redundancy, resign, are sacked or become unwell. The payout lasts for a few months, usually up to 12 months or until you find a new job.
How much does income protection cost?
Costs will vary from one person to another because each person’s circumstances are different. The price you pay will depend on personal factors like your age, and cover options such as the length of your policy and how much cover you need.
If you have a sick pay scheme provided by your employer, the cost of cover is usually paid by them. But these schemes often have a time limit attached. If you have an employer scheme and a personal scheme running together, your personal scheme can pick up when your employer scheme ends.
Income Protection cover with Vitality starts from £5 a month.
What affects the price of income protection insurance?
The cost of personal income protection is affected by several factors.
- Your age. As you get older, you’re more likely to make a claim.
- Your current health and whether you have any existing medical conditions.
- Your occupation and the risks involved in your job.
- How much cover you need to replace your income.
- How long you want your cover to last.
- How long you choose to defer payments. You can reduce the cost of cover by deferring your payout for several months.
- Optional add-ons such as fracture cover or indexation (allows you to increase your cover in line with inflation).
How to claim income protection insurance
At Vitality, we try to make claiming as simple as possible. But we will need evidence of your illness or injury before we can assess your claim. So, when it comes to claiming, follow our step by step guide.
1. Speak to your GP or consultant
Get a fit note from your GP or consultant which confirms you’re signed off work. This becomes the date when your deferred period starts.
2. Contact Vitality
Contact us as soon as you have your fit note.
We’ll need to know:
• Your name and plan number
• Details about the claim
• Date you stopped working
• Name and address of your GP or Consultant
You can also take advantage of our Recovery Benefit which can help you get back to work quicker.
3. Complete a claim form
We may need:
• more details about your illness or injury
• access to your medical records
• payslips or self-assessment tax details
4. Claim is assessed
We review all the details and let you know if the claim is successful. If it is, we confirm the amount you’ll receive each month and when payments will start and end. Claims are individually assessed and may be declined if policy conditions are not met.
5. Deferred period
Wait out your deferred period. Once this is over, your payments will begin.
6. Stay in touch
We may ask for updates about your condition. If you return to work, you must let us know straightaway.
There are some situations where we may not be able to pay a claim. Common reasons include:
- the information provided is incomplete or does not match the details in your application
- the illness or injury doesn’t meet the policies definition of incapacity or other terms
- the claim isn’t submitted within the required timeframes
Key takeaways
- Income protection is an insurance that can pay out a monthly amount to replace some of your income if you become ill or get injured and can no longer work.
- To receive a payout, you’ll need to meet the criteria of illness or injury set out by the insurance company. This is known as ‘own occupation’.
- Once your claim is accepted, you’ll receive a monthly payment until you return to work, retire, die, or the policy ends – whichever comes first. Payments are subject to policy limits.
- The price you pay will depend on personal factors like your age, and cover options such as the length of your policy and how much cover you need.
Vitality life insurance
Want to know more about life insurance or thinking about taking out a policy? Here are some of the benefits of taking out life insurance with Vitality:
- A brand you can trust - In 2024, we paid out 98.9% of all Life Cover claims.*
- Get a lower monthly premium upfront when you add Optimiser to your plan. Keep your premiums low when you stay active.
- Access to Vitality partner discounts and rewards.
- Get free no-obligation advice. Our advisers offer expert advice to help you make the right decisions.
You're not alone in choosing Vitality. Over 2 million lives in the UK are now covered by our insurance, and we’re here to support you too.
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*VitalityLife Claims and Shared Value Report 2025
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