Income Protection Insurance

If illness or injury stops you working, income protection keeps your household running. A monthly benefit (typically 50–70% of your earnings) paid until you recover or retire.

1 in 4

Workers Off 6+ Months Before 65

£123.25/wk

Statutory Sick Pay Rate (2026/27)

9 in 10

UK Workers Without Income Protection

What Is Income Protection?

Income protection (IP) is long-term insurance that replaces a portion of your salary if you're unable to work due to illness or injury. Unlike critical illness cover (which pays a one-off lump sum for specific conditions) income protection pays a regular monthly benefit for as long as you remain unable to work, right up to your chosen retirement age if necessary.

The benefit is usually set at 50–70% of your gross income (keeping it below your take-home pay to maintain an incentive to return to work). It's one of the most important protection products available, yet it remains severely underused: fewer than 1 in 10 UK workers have any form of income protection.

Example Scenarios

The following are illustrative examples only. They do not represent real clients or actual cases. Individual policy terms, eligibility and outcomes will vary.

Back injury: 14 months off work

Dan, a 41-year-old project manager, slipped a disc and was signed off for 14 months. Statutory Sick Pay (SSP) covered just 28 weeks at £123.25/week: nowhere near his £3,200/month salary. His income protection policy paid £2,200/month throughout, keeping his mortgage and household bills covered until he could return.

Burnout and anxiety: 9 months off

Laura, 37, a marketing director, was diagnosed with severe anxiety and depression. Mental health is one of the leading causes of long-term sickness absence in the UK. Her income protection policy covered mental health conditions: her insurer also provided access to a rehabilitation service that supported her return to work gradually, as many insurers do under long-term policies.

Self-employed contractor: no employer sick pay

Mike, a self-employed IT consultant, had no employer sick pay to fall back on. After being diagnosed with a cardiac condition that required surgery and 6 months' recuperation, without income protection in place, meeting his mortgage and living costs during that period would have been extremely difficult.

How Income Protection Works

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Deferred Period

You choose how long after falling ill before the benefit starts: typically 4 weeks, 13 weeks, or 26 weeks. A longer deferred period means lower premiums. Align it with how long your employer sick pay lasts.

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Benefit Period

Benefits can be paid until a fixed age (e.g. 65 or 68) or for a shorter period such as 2 or 5 years. Full-term policies cost more but provide complete protection for long-term or permanent conditions.

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Own Occupation Definition

The most comprehensive policies pay out if you can't do YOUR job: not just any job. This distinction matters enormously for professionals, surgeons, tradespeople and anyone in a specialist role.

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Indexation

Your benefit can be linked to inflation so it maintains its real value over time: important for policies that might pay out for decades.

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Waiver of Premium

Most policies waive your monthly premium while you're in claim, so you're not paying for a policy you're already benefiting from.

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Rehabilitation Support

Many insurers provide active case management, rehabilitation and occupational health support to help you return to work sooner: reducing the claim duration and, in time, your premiums.

What About Statutory Sick Pay?

SSP pays just £123.25/week (2026/27 rate) for up to 28 weeks. For most people, that represents a pay cut of 60–90%. And once SSP ends, there's nothing unless you have income protection, employer sick pay, or savings substantial enough to cover months or years of outgoings.

Employment and Support Allowance (ESA), the state benefit you may qualify for once SSP ends, pays a maximum of £145.90/week (New Style ESA, Support Group rate, 2026/27): again, a fraction of what most households need. Income protection fills this gap completely and is not means-tested.

How Much Does It Cost?

Premiums depend on your age, occupation, health, the deferred period, benefit amount, and whether you want the benefit to run to retirement. A 35-year-old office worker insuring £2,000/month to age 65 with a 13-week deferred period might pay £40–70/month. A manual worker or someone in a higher-risk occupation will pay more.

Baker Hudson Health compares policies from Legal & General, Aviva, The Exeter, LV=, Royal London, Vitality, and others to find the right combination of premium, definition of disability, and benefit terms for your situation.

Frequently Asked Questions

"Own occupation" pays out if you cannot perform your specific job. "Any occupation" only pays if you cannot work in any job at all. Own occupation is significantly more comprehensive: a surgeon with a hand injury might be unable to operate but could technically work in another role. Baker Hudson Health always recommends own occupation definitions and compares policies based on this.

That depends on the benefit period you choose. A full-term policy pays until your chosen retirement age (e.g. 65 or 68) if necessary. A short-term policy pays for a fixed period (1, 2, or 5 years) per claim. Full-term policies are more expensive but provide true protection against long-term or permanent conditions. Baker Hudson Health will show you both options with the cost difference.

Your deferred period should align with how long your employer sick pay lasts. If you receive 6 months' full pay, set your deferred period to 26 weeks and pay a lower premium: you only need the policy to activate when your employer sick pay stops. For the self-employed, a 4-week deferred period is more appropriate.

Yes: most quality income protection policies cover mental health conditions including depression, anxiety, and stress-related illness on the same basis as physical conditions. Mental health is now the leading cause of long-term sickness absence in the UK, so this is an important feature. Policy definitions vary, and Baker Hudson Health compares mental health cover terms when recommending policies.

Benefits from an individually arranged income protection policy (paid from personal premiums) are paid tax-free. If premiums are paid by your employer and the benefit is paid to the employer (group income protection), the benefit is treated as salary and taxed accordingly when passed on to the employee. Baker Hudson Health will explain the tax treatment of any policy we recommend.

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