Most UK households insure their phone, their car and their house. Far fewer insure the income that pays for all three. Income protection is the policy that fills that gap — and the most common question once someone has decided they need it is also the trickiest: how much cover should it actually provide?
There’s no universal answer. The right amount depends on your salary, your employer’s sick pay, your fixed costs, your existing savings and whether anyone else in the household earns. What follows is a structured way to think about it.
What income protection actually does
Income protection pays a tax-free monthly benefit if illness or injury stops you working. Unlike critical illness cover, it isn’t triggered by a specific named condition — it’s triggered by your inability to perform your occupation. Cover continues until you can return to work, reach the policy’s end date, or in some cases retire.
Modern UK policies usually cap the benefit at around 60–65% of gross income. Insurers don’t pay 100% deliberately: the gap is meant to keep an incentive to return to work where possible. The actual amount you’ll receive after tax is typically close to your usual take-home pay.
Step one: understand your sick pay
Before sizing the cover, find out what your employer would actually pay you and for how long.
- Statutory sick pay is the legal minimum — and it’s a fraction of any meaningful household income.
- Contractual sick pay is what many larger employers offer on top. Schemes vary widely. Some pay full salary for six months, then half pay for another six. Others pay nothing beyond SSP.
- Self-employed and contractor income stops when you do. There is no employer behind you.
The point at which your sick pay reduces or ends is the point your income protection should start paying. That gap is called the deferred period.
Step two: work out your monthly fixed costs
A useful starting point is to list everything that has to keep being paid each month if you weren’t working:
- Mortgage or rent
- Council tax and utilities
- Food and household basics
- Childcare and school costs
- Insurance premiums and protection products
- Minimum debt repayments
This gives you a floor — the absolute minimum monthly figure that has to come from somewhere. Anything above that floor is comfort and flexibility rather than survival.
Step three: factor in other resources
Cover doesn’t exist in isolation. Two things sit alongside it.
Emergency savings. A solid cash buffer can cover several months on its own, which lets you choose a longer deferred period and a cheaper premium. Three to six months of essential outgoings is a common target.
Partner income. In a dual-income household, the other partner’s earnings may cover part of the gap. That changes the calculation. In a single-income household, the gap is wider and the cover has to do more.
Step four: choose a deferred period
The deferred period is how long you wait after stopping work before the policy starts paying. Common options are 1, 3, 6 or 12 months.
- A short deferred period (1 or 3 months) means higher premiums but kicks in sooner.
- A longer deferred period (6 or 12 months) lowers premiums substantially. Useful if your employer pays full sick pay for that window, or if your savings can bridge it.
The most expensive policy isn’t always the most useful one. Aligning the deferred period to your existing protection — sick pay first, savings second — usually produces better value than insuring against day one.
A few other things to weigh
- Own occupation vs suited occupation. “Own occupation” pays out when you can’t do your specific job. “Suited occupation” only pays out if you can’t do any reasonably suited role. Own occupation is the stronger definition.
- Indexation. Linking the benefit to inflation prevents the policy losing real value over a long claim.
- Long-term vs short-term policies. Short-term cover (two- or five-year claim caps) is cheaper, but serious long-term illness is precisely what most people are insuring against.
Where this fits in a wider plan
Income protection sits alongside life cover, critical illness cover and emergency savings. They protect different events, and the right balance between them depends on your circumstances rather than any general rule. For business owners and directors, the picture also overlaps with key person cover and relevant life policies — the boundary between personal and corporate protection can blur quickly.
If you’d like a clearer view of how all those pieces fit around your specific situation once I’m authorised, join the waitlist — you’ll be first in line when the books open.