Unfortunately, some of us are going to suffer an illness or disability that will impact our ability to work. However, do you know if your income is covered if you were to be off work for any length of time? If so, for how long and to what extent?
Are you aware that there is something out there that could help ‘soften the blow’ until you are back on your feet?
Income Protection (otherwise known as Permanent Health Insurance) is a type of insurance policy that pays out if you are unable to work due to sickness or injury. It is designed to replace some of the income you would have received if you were working. It doesn’t pay out a lump sum but provides you with a tax-free regular income when you claim (Usually limited to around 50-65% of your gross income).
Different policies have different conditions, but some important ones for you to be aware of will be:
- The term (how long the policy lasts)
- The deferred period (how long after you get sick before your policy will pay out)
- The payment period (how long after you claim the income will be paid for)
- The type of work you do (which dictates whether you can claim when you’re unable to do your own job or if claims are more restricted).
Deferred Period
Most income protection policies don’t pay out immediately. Some policies might be eligible to pay out as soon as 4 weeks after meeting the necessary conditions for a claim. Others might be longer, at 12, 26, 52 weeks, and so on. This means that you would need to have been off work for a continuous period exceeding the deferred period before your claim will become payable.
This is where an emergency fund could come in handy. A longer deferred period means you’re less likely to meet the requirements from the provider, which in turn reduces the monthly payments.
Underwriting
Just like all insurance policies, your application for cover will be assessed by an underwriter. If you have pre-existing medical conditions, such as back pain or a mental health history, the underwriter might ‘exclude’ these from cover, meaning that if you are unable to work for this reason you can’t claim on the policy.
Underwriters can also adjust the cost of your cover. For example, if you have a history of poor health, or work in an occupation that puts you at greater risk of injury, they might not exclude something specific but might increase the cost you have to pay each month.
Premiums
The cost of your cover depends on various factors, including your age, your state of health, and lifestyle choices such as smoking. It will also be dependent on the features of the cover you have chosen, such as the deferred period and the level of cover. Premiums might be ‘guaranteed’ and stay the same for the duration of your policy, or ‘reviewable’, which means that the cost of your cover might increase in future years as you get older.
Why should I get covered?
We don’t like to think of ourselves as being unwell or off work for any length of time, however unfortunately these things do happen. Over two thirds (67%) of UK adults surveyed said that they’d struggle financially if they were unable to work (Consensus, 2024). Current trends showcase that more and more people are taking out Income Protection to safeguard a proportion of their finances.*
Despite these growing trends, only 14% of people in the UK have Income Protection in place.** Some people will receive cover from their employer, however the gulf in people needing protection and not having it in place can be a costly one – creating additional stress, on top of having to deal with a period of being off work through ill health.
In summary, Income Protection can be a very useful policy to have in place, should you experience an extended period off work. At best, having a tailored plan in place for you and never needing it means that you have not suffered from ill health and you have had peace of mind throughout your working life.
At worst, you are protected from an extended period off work and can recover at home, safe in the mind that you have regular income coming in to ensure that you can still pay the bills, before returning to work when able.
October 2025
* The ABI, 2024. Record number of individuals take out Income Protection Insurance to safeguard finances
** Shepherds Friendly, 2024. The Income Protection Gap in the UK
SpringGen Advice Ltd, 928966, is an appointed representative of Acumen Financial Planning Ltd, which is authorised and regulated by the FCA, FRN 218745. Please be aware that tax planning and tax advice are not regulated by the Financial Conduct Authority.
The content within this guide is for information purposes only and should not be looked upon as advice or recommendation.
