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Income protection insurance explained

Find out what income protection insurance is. We'll tell you what's covered and why you should consider it.

What is income protection insurance?

Income protection insurance is a type of insurance. It’s designed to cover your income if you become ill or get injured and can’t work. It ensures you're paid a regular income until you can return to work, or you retire.

These payments can help you to continue to pay for essential outgoings if you’re unable to work for a while. It can cover expenses like:

  • mortgage and rent payments
  • utility bills
  • childcare
  • general living costs

How does income protection insurance work?

Once your plan is set up, you will pay a monthly premium. If you become unable to work due to sickness or injury, you'll get a monthly payout. This helps to support you with your monthly income. Your cover will last until the end of the term or until you retire ­– whichever is first. 

You won't be able to select cover for the full amount of your gross salary. But, you can expect to be able to select up to 60% of your gross salary, depending on your income.

You and your insurer will also agree on a waiting period. This is also called the deferred period. It's the period it takes for your cover to be paid following an illness or accident.

You have a choice of deferred periods and it should usually be in line with your sick pay. So, when your sick pay stops from your employer, your income protection benefit will start.

For example, if you have six months of sick pay, then you would set your deferred period to six months. This is when you can claim income protection insurance.

The longer the deferred period, the more affordable the premium will be.

Types of income protection insurance

There are two main types of income protection insurance – short-term and long-term.

  • What is short-term income protection insurance?

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    Short-term income protection provides cover for a fixed period if you get sick and are unable to work. The length of time varies but is usually between one and two years.

  • What is long-term income protection insurance?

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    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.

Who is income protection insurance for?

Income protection insurance can buy security if you were unable to work due to an illness or injury. If you depend on your income to pay bills and rent, for example, it could be a good idea to consider it.

Income protection insurance is worth considering if:

Have limited savings - think about how long this could cover you for if you were unable to work

  • You have limited savings - think about how long your savings could cover you for if you were unable to work. Would it be enough to pay for your essential outgoings until you can go back to work?
  • You have a family or dependents - Do your partner or children rely on your salary? Then, you may want to consider income protection. This could help to take care of them while you’re getting better.
  • You have outstanding debt - are you currently working on paying off any credit cards or loans? You could use some of the money you receive from income protection to keep on top of these payments.

There are also instances in which income protection may not be the best option. For example, you have enough savings for bills, but not enough to cover your mortgage. In this case, you could consider mortgage protection.

How much income protection insurance do I need?

When you buy an income protection policy, you'll choose the amount of cover you need and the policy term. The amount of cover you'll need depends on:

  • your salary
  • your outgoings
  • how long you expect to be out of work for
  • any expected medical bills.

How much is income protection insurance?

Insurers will ask you to share certain information about your lifestyle and health records. This will affect how much you will pay each month. Many factors will affect how much your premiums cost. Including:

  • your age
  • your medical history
  • your alcohol consumption
  • whether or not you’re a smoker your occupation.

Insurers will usually class different jobs at different risk levels. If, for example, your job is in a high-risk occupation category, you may need to pay higher premiums.

What illness does income protection insurance cover?

Income protection policies will cover any type of injury and illness. But, only if it causes a loss of income due to reduced hours or time off work. Conditions such as:

  • cancers
  • strokes
  • heart attacks
  • musculoskeletal conditions
  • becoming disabled
  • developing a mental health condition that requires you to take time away from work

If there is something specific that you want to be covered for, you’ll need to check that it’s included in the policy.

Does income protection cover redundancy?

Most insurers do not cover redundancy with an income protection policy. But, every insurer is different, so it’s worth checking.

Do I need income protection and critical illness cover?

Both income protection and critical illness cover pay out if you become ill. There are differences in the types of illnesses covered and the way the policies pay out:

  • An income protection policy gives you regular monthly tax-free payments. Critical illness cover pays out a tax-free lump sum
  • Income protection protects against loss of income due to an illness or an accident. Be sure to check the terms and conditions of each policy
  • With income protection, there is no limit to the number of times you can claim. A critical illness plan may end following a single claim.

Vitality's serious illness cover, is the only plan that let's you claim more than once. We also cover for more conditions than any other insurer.*

It is possible to buy both income protection and critical or serious illness cover.

Read more in our critical illness cover guide

*Vitality Claims and Benefits Report, 2023

Can I claim ESA if I have income protection insurance?

Yes. You'll still be eligible for the Employment Support Allowance (ESA). But, it may affect your payout. Income like state benefits, non-employment related dividends, and rental income don't affect payouts.

How much money would I receive?

Depending on the cover you select at the start of your policy, you could get up to 60% of your gross salary, depending on your income. The payout can be lower if you select a lower amount of cover.

Is income protection taxable?

The money you will receive from income protection is usually tax-free. This is why insurers will cover you for up to 60% of your gross income. It works out approximately the same as if you were receiving your net income with tax deducted.

Find out more about our income protection cover, or get a quote here.

Why choose Vitality income protection insurance

At Vitality, we offer a variety of income protection insurance options that cater your needs:

  • Up to 20% extra on your payout - Boost your monthly payout for up to six months by looking after your health.1
  • Healthcare and support - Access a panel of support services to help your recovery when you claim. Includes physio, therapy and cancer support.
  • Flexible cover - Increase cover, waiting periods and payment periods when big life events happen.
  • Discounts and rewards - Earn great rewards, like a gym membership, spa breaks and a weekly coffee

Find out more about our income protection cover.

1Boosts are linked to your Vitality status at point of claim. Find out more about the Vitality Programme.

Last update: November 2023

Relevant guides and articles

  • Self-employed income protection insurance

    Self-employed and thinking about income protection? Read our guide to help understand how it works and if you need it.

  • Mortgage protection insurance

    Mortgage protection is a type of life insurance designed to pay off your mortgage. Read our guide to help decide if it's a good option for you and your family.

  • Serious and critical illness cover

    Like income protection, serious and critical illness cover pays out if you're diagnosed with a serious illness. Instead of replacing your monthly income, it pays out on lump sum. Read more about serious and critical illness cover in our guide.