Income Protection: The Unsung Hero of Your Financial Life

Income Protection (IP) is the unsung hero of personal financial protection. Most of us would happily add the £20-per-month tech cover to insure our mobile phones, but don't think to insure the most important thing of all — ourselves.

IP provides you with a regular monthly income if you’re unable to work due to illness or injury. Think of it like private sick pay: you get a monthly replacement wage amount (often up to around 65% of your gross salary, paid tax-free) precisely at the times when you need it most. It’s the financial equivalent of a warm blanket, a cup of tea, and someone saying, “Don’t worry, I’ve got you.”

Let’s unpack how it works, what optional features you can add, and why it’s a total game-changer for certain types of workers.

Why Income Protection Matters (More Than You Think)

Let's face it, most of society relies on income. Rent, mortgage payments, food, travel, gas, electric, Wi-Fi (because let’s be honest, we’d all starve before giving that up)… it all needs paying for. But what happens if you suddenly can’t work?

Many people assume their employer will step in like a benevolent fairy godmother. Sometimes they do. But in a large number of cases, you’ll quickly find yourself leaning on Statutory Sick Pay (SSP) — and that’s when things get interesting.

The Reality Check

Let’s compare your options:

Statutory Sick Pay (SSP)

• Paid by employers (if eligible)

• Current rate: £116.75 per week (yep, per week)

• Payable for up to 28 weeks

• Taxable

• Let’s be honest: unlikely to cover Netflix and weekly food shop, nevermind your rent or mortgage

Income Protection (IP)

• Pays up to 65% of your gross income

• Paid tax-free

• Can last 2 years, 5 years, or even until retirement, depending on your policy

• Kicks in when illness or injury prevents you from working

• Much more aligned with your actual living costs

Put simply: if SSP is a soggy paper umbrella in a thunderstorm, Income Protection is a sturdy, storm-proof gazebo with fairy lights.

Key Features of Income Protection

Here’s what you usually get as standard:

✔ Monthly Tax-Free Benefit

A regular, predictable payout that replaces a chunk of your salary.

✔ Choice of Benefit Amount

Typically up to 50–65% of your gross pay, depending on the insurer.

✔ Choice of Policy Length

• Short-term (pays out for 1–5 years per claim)

• Long-term (pays until retirement or until you’re well enough to work)

✔ Choice of Waiting Period (a.k.a. Deferred Period)

You pick how long you’d wait before payments start — for example:

• 1 week

• 4 weeks

• 8 weeks

• 13 weeks

• 26 weeks

A longer waiting period usually = lower monthly premium.

✔ “Own Occupation” Cover

Many policies pay out if you can’t do your specific job — not just "any job."This is extremely handy if your job doesn’t translate well to sitting at a desk answering emails forever.

Optional Benefits You Can Add (Like Extra Toppings on a Pizza)

Get ready to customise:

➕ Fracture Cover

A lumo sum payment if you break a bone — ideal if you're accident-prone or enjoy sports… or just have the balance of a newborn giraffe.

➕ Hospitalisation Benefit

Pays a daily amount if you’re in hospital for an extended period.

➕ Waiver of Premium

Your insurer pays your premiums while you’re claiming — one less bill to stress about.

➕ Guaranteed or Indexed Increases

Choose a policy that:

• Keeps your premium fixed

• Or increases your benefit each year (helping protect against inflation)

➕ Rehabilitation & Support Services

Some insurers include help returning to work — think physio, counselling, or occupational therapy.

Who Benefits the Most from Income Protection?

Let’s be honest: everyone who depends on their income can benefit. But for some people, IP is not just helpful — it's essential.

1. Self-Employed

If you're self-employed, guess how much SSP you get? Nothing. Zero. Nada. You are your own employer — so if you can’t work, your income stops. IP can be the lifeline that keeps your business alive.

2. Anyone Without Generous Sick Pay

If your employer only gives you statutory sick pay (or a few weeks on full pay), you’ll feel the financial pinch quickly.

3. Sole and High Earners

If the household relies wholly or mainly on your income, your finances have no Plan B.

4. People With Families or Dependants

Whether it’s children, elderly relatives, or the world’s most pampered cat — responsibilities mean you need a safety net.

5. Manual Workers

If your job depends on your body working properly (builders, electricians, plumbers, decorators, etc.), even small injuries can take you out of action.

Real-World Scenarios Where IP Saves the Day

🛠 A builder breaks his arm on-site

You could get a lum sum payment for the broken arm with fracture cover, and a monthly replacement wage while you're recovering.

💻 A freelancer develops severe RSI

SSP: not eligible. IP: steps in to provide income while they recover.

👶 A parent needs time off due to long-term illness

SSP: limited and low. IP: helps keep the household running securely.

👩‍⚕ A nurse injures her back

SSP: helpful but low.IP: provides enough to maintain normal living costs.

Final Thoughts: Protect the One Thing You Truly Can’t Replace — Your Income

Your income pays for your home, your food, your future… and that little Saturday treat you absolutely deserve.

Insuring it isn’t a luxury — it’s a smart move. And often costs as little as a takeaway or a train ride into London!

Because at the end of the day, your income deserves as much protection as your phone — probably more, unless your phone is far more talented than you.