How long does income protection pay out?

It depends on the benefit period you choose. Short-term income protection pays out for 1-2 years per claim - cheaper but limited. Long-term income protection pays until you return to work or reach retirement age (e.g. 65 or 67) - comprehensive protection but more expensive. For most employed workers, long-term income protection is the recommended option, as serious illness or injury can prevent work for years or permanently, and sick pay from employers typically runs out after 3-12 months.

How much does income protection cost UK?

Income protection premiums vary significantly based on age, health, occupation, deferred period, benefit amount, and benefit period. A rough guide: a 30-year-old office worker in good health, non-smoker, covering £2,000/month benefit with a 13-week deferred period to age 65 might pay £30-60/month. Manual workers, those with health conditions, and smokers pay significantly more. Comparing multiple quotes through a specialist protection adviser is strongly recommended.

Income Protection Insurance UK 2025

Q: What is income protection insurance?

Income protection insurance (also called permanent health insurance or PHI) pays a regular tax-free income - typically 50-70% of your pre-tax earnings - 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 covers any illness or injury that prevents you from working, and pays out until you return to work, reach the end of the benefit period, or reach your chosen retirement age.

What Is Income Protection insurance?

Income protection insurance (IP) pays you a regular, tax-free monthly income if illness or injury stops you from working. Unlike life insurance (which only pays on death) or critical illness cover (which only pays for specific serious conditions), income protection covers any illness or injury that stops you doing your job.

The payout is typically 50-70% of your pre-tax income - enough to cover essential outgoings while you recover, without over-insuring and removing the incentive to return to work. Payments continue until you recover, the benefit period ends, or you reach your chosen retirement age.

The state safety net for those unable to work is thin. Statutory Sick Pay is just £116.75/week (2024/25) for a maximum of 28 weeks. After that, you may qualify for Employment and Support Allowance (ESA) - around £84-£138/week. For most homeowners and families, this won't cover mortgage payments and basic living costs. Income protection fills that gap.

Key Features: How Income Protection Works

Critical feature

Deferred Period

The waiting period between being unable to work and getting your first payment. Options: 4 weeks, 8 weeks, 13 weeks, 26 weeks, 52 weeks. Longer deferred periods mean lower premiums. Match yours to how long your employer sick pay or savings would cover you.

Critical feature

Benefit Period

How long the policy pays out per claim. Short-term (1-2 years) is cheaper. Long-term (to age 65 or 67) is more thorough but costs more. For most people, long-term IP is worth the extra - a serious condition could keep you out of work far longer than 2 years.

Key decision

Own Occupation vs Suited Occupation

"Own occupation" pays out if you can't do YOUR specific job. "Any occupation" only pays if you can't do any job at all. "Suited occupation" pays if you can't do a job that matches your skills. Own occupation gives the strongest protection - always prioritise it.

Important

Guaranteed vs Reviewable Premiums

Guaranteed premiums stay fixed for the life of the policy - more expensive upfront but predictable. Reviewable premiums start lower but the insurer can raise them (typically every 5 years). Guaranteed premiums are generally the better choice for long-term policies.

Choosing Your Deferred Period

The deferred period is the biggest lever on your premium. Here's how to pick the right one:

Employer full sick pay: If your employer pays full salary for 3 months, choose a 13-week deferred period. 6 months of full sick pay - go with 26 weeks.
Savings: 3 months of expenses saved means a 13-week deferred period works well. 6 months saved - use a 26-week deferred period.
Self-employed: No employer sick pay buffer exists. A 4-week or 8-week deferred period is more appropriate, since income stops the moment you can't work.

ℹ️ Layering your protection

The best approach: match your deferred period to when your employer sick pay runs out. Then layer your IP payout on top of any state benefits you'd receive. You don't need to cover 100% of income - just enough to meet essential outgoings (mortgage, bills, food, childcare).

Income Protection vs Critical Illness Cover

Feature	Income Protection	Critical Illness Cover
What triggers payout	Any illness/injury stopping work	Specific listed conditions only (cancer, heart attack, stroke etc.)
Payout type	Regular monthly income	One-off lump sum
Duration of payout	Until recovery / retirement	Once only
Mental health covered?	Usually yes	Rarely
Musculoskeletal (back etc.)?	Usually yes	Rarely
Cost	Moderate	Moderate (often cheaper than IP)
Most valuable for	Mortgage/living cost protection	Supplement - paying off mortgage, adapting home

If you can only afford one, income protection is generally the more thorough choice - it covers far more conditions and pays for longer. Critical illness works best as a supplement, not a replacement.

Income Protection for the Self-Employed

Income protection is arguably most important for self-employed workers - because there's no employer sick pay at all. If you can't work, your income stops immediately.

Choose a short deferred period (4-8 weeks) since there's no sick pay buffer
Watch how you define income on the application - insurers typically base cover on your last 1-3 years' average profit, not turnover
If income fluctuates a lot, look for "agreed value" policies that pay a fixed pre-agreed amount rather than a percentage of actual income at claim time

Frequently Asked Questions

No - standard income protection only covers inability to work due to illness or injury, not unemployment by choice or redundancy. Some policies include optional redundancy cover (sometimes called accident, sickness and unemployment or ASU cover) as an add-on, but these typically have short benefit periods (12-24 months) and strict conditions. They're a separate product from long-term income protection.

Premiums are paid from post-tax income (no tax relief in most cases), and in return the payout is tax-free. This differs from group income protection provided through a workplace scheme, where premiums may be paid by the employer but the payout is treated as employment income and taxed accordingly.

Most income protection policies exclude: pre-existing conditions (medical issues you had before the policy started), self-inflicted injuries, and some policies include a mental health waiting period or exclusion. Some insurers now cover mental health conditions from day one - worth checking specifically, as mental health is one of the leading causes of long-term absence. Always read the policy's definition of incapacity carefully before you buy.

Important: Income protection is a complex product with significant variation between providers. Always seek advice from a specialist protection adviser or independent financial adviser. This is educational content only - not regulated financial advice.