Income Protection Insurance

How It Works

You shape the policy around your situation, then it pays out if you cannot work.

• You choose how much income to cover. Most insurers let you cover roughly 50% to 70% of your gross income. The benefit is normally paid tax free on personal policies.
• You choose your deferred period. This is the waiting time before payments start, commonly 4, 8, 13, 26 or 52 weeks. A longer wait means a lower premium, so many people line it up with their savings or employer sick pay.
• You choose your benefit period. This is how long the payments can last. Short term cover pays for a set spell, often 1, 2 or 5 years per claim. Long term cover keeps paying until you recover, the policy ends, or you reach retirement.
• You choose how incapacity is defined. Own occupation cover pays if you cannot do your own job. Any occupation cover only pays if you cannot do any suitable job, so it is cheaper but narrower.
• You answer health and lifestyle questions. Answering fully and honestly matters, since non disclosure is a leading reason a claim is declined.
• You pay a monthly premium, and claim if you cannot work. Once the deferred period has passed, the insurer pays your monthly benefit until you return to work, the benefit period ends, or the policy ends.

Who May Need It

Income protection suits anyone who lives on their wages and could not manage long on savings alone. Think mortgage or rent, bills and family costs. It is worth a close look if you are self employed, because you get no employer sick pay, or if your sick pay at work runs out quickly.

The gap it fills is bigger than most people think. For many employees, Statutory Sick Pay is the only safety net. Here is what it pays in 2026/27.

Statutory Sick Pay rates for 2026/27, in force from 6 April 2026, when waiting days and the Lower Earnings Limit were removed. See GOV.UK.2

If you are used to a full salary, dropping to about £534 a month is a big fall, and it stops after 28 weeks. The not for profit Income Protection Task Force, through its 7Families project, shows how fast a family can struggle when the money stops. Even so, more than four in ten UK adults could not cover their living costs for three months if they lost their main income, according to the FCA, and income protection is still one of the least held protection products.3 It may matter less if you have plenty of savings, a partner’s income to lean on, or generous long term sick pay from work. For free guidance, use MoneyHelper, the government backed service, or Citizens Advice for your sick pay rights.

What It Usually Covers

Income protection covers a wide range of illnesses and injuries that stop you working. It is not a fixed list of named conditions. If you cannot work and your deferred period has passed, the policy pays your monthly income. Many policies also help you get back to work, with things like virtual GP access, physiotherapy and mental health support. Some pay a part amount if you return part time on less pay.

This support is widely used. In 2024, UK insurers paid £204 million in individual income protection claims, up 16% on the year, with an average claim of £10,000 (ABI).1 The top cause was musculoskeletal problems, meaning back, neck and joint pain, at 34% of claims.1 Mental health conditions are also among the most common reasons people cannot work.

What It May Not Cover

Income protection is broad, but it has clear limits.

• The deferred period. Nothing is paid during the waiting time you chose. A longer wait lowers the premium but means longer on your own resources.
• Existing conditions. Health problems you already have when you apply may be excluded or carry a higher premium.
• Non disclosure. If you do not give accurate information when you apply, a claim can be declined. Non disclosure and not meeting policy definitions are the most common reasons protection claims are refused.1
• Redundancy and unemployment. Standard income protection covers illness and injury, not loss of your job. Cover for redundancy is a separate product, usually short term.
• Death. Income protection stops at death and pays nothing to your family. Life insurance is the cover for that.
• Work you can still do. On an any occupation policy, there is no payout if you could do another suitable job, even if you cannot do your own.

How Much Cover You May Need

A good starting point is to cover the income you need for your essential outgoings, meaning the regular costs you must pay, like the mortgage or rent, bills and food. Most insurers cap the benefit at about 50% to 70% of your gross income, partly because the payout is normally tax free.

Then set the two things that shape your cover and your price. Match the deferred period to how long you could manage on savings or sick pay. Set the benefit period to how long you would need the money, with cover to retirement being the most complete. As a rough guide, income protection often costs 1% to 3% of your gross yearly income.4

Cost Factors

Your price is personal to you. The biggest factors are your age, whether you smoke, your health and your job, because riskier jobs cost more. How much income you cover, your deferred period, your benefit period, and own versus any occupation all change the price too.

To show the typical cost, we have gathered average figures from published UK pricing and market surveys. These are examples, not Surely quotes.

Surely analysis of published UK income protection pricing and market surveys, 2025 to 2026. Figures are averages, illustrative and not quotes, and the assumptions behind them are set out in the methodology below.4 The largest swings come from your age, occupation and the deferred period you choose.

Two things surprise people. Most overestimate the cost, when a healthy 35 year old can often start at about £35 a month. And making your deferred period longer, say from 4 weeks to 13 weeks, can cut the premium a lot if you have savings or sick pay to cover the gap.4

How It Compares

People often weigh income protection against critical illness cover and life insurance. Here is how the three differ.

Typical cost figures are Surely analysis of UK protection pricing.4 Tax treatment depends on your circumstances and may change.

The three protect against different events, so some people hold more than one.

Worked Example

This is a simple illustration of how a policy might work. It is not a quote or a promise of cover.

Meet Sam. He is 34 and self employed, so he gets no sick pay. He takes out cover for £1,500 a month with a 13 week deferred period, running to age 65, costing about £30 a month.

He hurts his back, the most common reason people claim, and cannot work for five months. His savings cover the first 13 weeks. After that the deferred period ends, his claim is checked and paid, and the policy pays £1,500 a month tax free until he recovers and goes back to work, when the payments stop. If he had never needed to claim, the cover would simply have carried on in the background.

Why Use Surely

Income protection has more moving parts than most cover: deferred periods, benefit periods, and own or any occupation. We make it clear.

We explain it in plain English, with no buried small print. We compile and cross check real UK claims and pricing data, so you see the full picture. We are honest about the limits, including what a policy will not pay for. And we help you compare clearly, so you can decide what fits.

The numbers are reassuring. Over the past decade, 97.9% of individual protection claims have been paid, and in 2024 income protection insurers paid £204 million to people who could not work.1 Surely helps you compare cover from selected UK insurers, so you can find a policy that fits your needs and budget.

Income protection is a regulated product, and the insurers and advisers you deal with are authorised and regulated by the Financial Conduct Authority. Surely helps you compare clearly but does not give regulated financial advice.

Frequently Asked Questions

Is income protection worth it?

It can be, particularly if you would struggle to pay the mortgage or bills after a few weeks without income. It is most valuable for self employed people and anyone with short or no employer sick pay. If you have large savings or generous long term sick pay, the case is weaker.

How is it different from critical illness cover?

Critical illness cover pays a single lump sum if you are diagnosed with a covered serious illness. Income protection pays a regular monthly income for as long as illness or injury keeps you off work, whatever the cause. Some people hold both.

What is a deferred period?

It is the waiting time between stopping work and your first payment, commonly 4, 8, 13, 26 or 52 weeks. A longer deferred period lowers your premium, so many people set it to match their savings or employer sick pay.

What is the difference between own and any occupation?

Own occupation cover pays if you cannot do your own job. Any occupation cover only pays if you cannot do any suitable job, so it is cheaper but pays out less often. Own occupation is generally the stronger protection.

Does it cover redundancy?

No. Standard income protection covers illness and injury that stop you working, not losing your job. Cover for redundancy is a separate product, often called accident, sickness and unemployment cover, and is usually short term.

Is the payout taxed?

On a personal policy the monthly benefit is normally paid tax free, which is why cover is usually capped below your full income. Tax treatment depends on your circumstances and can change, and business or executive policies are treated differently, so it is worth checking your own position.

Do I still need it if I get sick pay?

Statutory Sick Pay is only £123.25 a week for up to 28 weeks, and employer sick pay varies a lot and often runs out. Income protection can take over when sick pay stops, and you can set the deferred period to match.

Will it cover conditions I already have?

Existing conditions may be excluded or carry a higher premium. You should still disclose them honestly when you apply, because non disclosure is one of the main reasons a claim is declined.

This guide deals with illness and injury. If you have a health concern, your GP or NHS 111 can help, and for impartial money guidance you can use MoneyHelper.

Income Protection In Numbers

Here is our summary of the latest market data.

Surely analysis of ABI and Group Risk Development protection data 2024.1 The most common reasons a claim is declined are non disclosure and not meeting policy definitions.

Deciding If It Is Right For You

Income protection protects your ability to earn, which most of your plans rely on. It works best when the benefit covers your essential outgoings, the deferred period matches your savings or sick pay, and the benefit period lasts as long as you would realistically need. Take your time, compare a few options, and check the definition of incapacity, the wording that says when the policy pays. That is where policies differ most.

Cover, price and eligibility depend on your personal circumstances, age, health, occupation, smoker status and insurer terms, including the deferred period and the policy's definition of incapacity. Surely helps you compare insurance and does not provide regulated financial advice.