Is it worth taking out income protection insurance alongside your existing life insurance policy? Let’s find out.

Income protection insurance is designed to ensure that you are financially supported whatever life throws your way. And, income protection can be very valuable to households that rely on the policyholder’s income.


Income protection insurance provides a security blanket in many scenarios. But, is it worth the investment for you? Simply put, everyone is different and your individual circumstances will dictate whether income protection insurance is essential for you.


In this guide, we’ll explain exactly what income protection is. We’ll also take you through what is covered by the policy and how and when it pays out. Read on to learn more.

What is income protection and what’s it for?

Income protection is a long-term insurance policy. It ensures your financial stability by providing a regular income until your retirement or until you are well and able enough to return to work.


Should you find yourself unable to work due to illness or an accident, many people assume that their employers will continue to provide at least a percentage of their income.


The truth of the matter is that employees are usually switched to Statutory Sick Pay (SSP) within the initial six months.


Anyone considering taking out income protection insurance should read the fine print in their contract of employment to be very clear about what you can expect if you end up being off sick for a prolonged period of time.

What is the risk if you don’t have income protection?

Anyone without income protection insurance is at risk of having a vastly reduced income. SSP pays just £109.40 per week (accurate as of April 2023) which is rarely enough to cover financial commitments in most situations.


Unless you have a substantial amount of savings set aside for this type of scenario, the loss of income can quickly leave you unable to cover those essential household bills.


It’s also worth mentioning that anyone classed as self-employed or a contractor is unlikely to have any sick pay to fall back on other than SSP.

What does income protection cover and what does it payout for?

Income protection insurance offers regular payments that replace a percentage of your income should you find yourself unable to work due to illness or an accident. It usually pays out on a monthly basis until you are well enough to return to work, retire, die or reach the end of the policy term.


Income protection insurance typically pays out between 50% and 70% of your income while you’re unable to work. It covers most illnesses and accidents that result in you not being able to work, both short or long-term.


One thing to be aware of is that there’s usually a pre-agreed waiting period prior to the policy paying out. Standard waiting periods can be 4, 13, 26 weeks or a year. The longer you agree to defer your, the lower the monthly premiums will be.

Can you claim benefits if you have income protection insurance?

In short, yes. Having income protection insurance doesn’t affect your right to claim SSP. Statutory Sick Pay can be claimed alongside your income protection insurance policy and helps to give you a little more financial stability while you ready yourself to return to work.

Is income protection insurance better than critical illness cover?

Income protection insurance is quite different to critical illness insurance. Critical illness cover will pay out a one-off lump sum if you have a specific serious illness. Which is right for you or whether to invest in both will depend on a number of different factors.


Before choosing to take out critical illness cover, income protection insurance or both, think about the below:


  • What policy premiums can you afford to work into your monthly budget? Take a closer look at your budget and figure out which is most affordable.

  • Existing debts. Your mortgage and any other outstanding debts you may have will still need to be paid if you find yourself unable to work. What financial responsibilities will you have regardless of any unforeseen health issues that have the potential to arise?

  • Monthly outgoings. Are utility bills and food shops largely your responsibility in your household? These are unavoidable expenditures for the majority of households. If you want to ensure that these are covered whatever life throws your way, both income protection insurance and critical illness cover could be the life line you’re searching for.

  • Your household’s reliance on your income. How important is your income to your family? If you’re the breadwinner or are in an equal-earnings household and the loss of your income would be detrimental, investing in both income protection insurance and critical illness cover could be a smart move.

How much does income protection insurance cost?

The cost of income protection insurance varies depending on your personal circumstances. Typically you can expect to pay somewhere between £10 and £80 per month. The below factors will impact the price of your income protection insurance policy:


  • As a general rule, the older you are the more expensive your income protection insurance policy is likely to be.

  • Overall health. Your medical history will also impact your income protection insurance policy fees. If you have already been diagnosed with an underlying health issue, your policy is likely to be much pricier if available at all.

  • Lifestyle in general. Whether you smoke or not, how much you drink on a weekly basis and how active you are will all impact the overall cost of your income protection insurance policy.

Other things that will impact the cost of an income protection insurance policy include the length of the policy, the level of cover and the agreed deferred term. The longer you want a policy to last will ultimately impact the price. As will the level of cover you require, i.e. how much you’ll need the policy to pay out. The longer you agree to defer the start of the payments, the lower your monthly premiums will be.

Why secure income protection with Life Expert

At Life Expert, we deliver quotes from our panel of insurers. We’ll also help you to conduct a full comparison between the best income protection insurance options to suit your needs. All of our quotes are completely personalised. Plus, our experts are always on hand to help guide you through the entire purchasing process.