Income Protection in the UK: Why It Matters and What to Look For

Protecting your income when life takes an unexpected turn

Imagine being unable to work for several months due to illness or injury. For most households and small businesses, losing regular income even for a short time could cause real financial strain. That’s where Income Protection (IP) comes in — a type of insurance designed to replace a portion of earnings if you can’t work.

This article explores how Income Protection works, the different types available, and the key features worth considering. We’ll also touch on how providers tailor cover for different situations, from families to business owners.

What is Income Protection?

Income Protection (IP) is an insurance policy that pays a regular income if you’re unable to work due to illness, injury, or disability. Unlike critical illness cover, which pays a lump sum, IP provides ongoing payments — weekly or monthly — until you can return to work, retire, or reach the end of the policy term.

Typical features include:

• Covering up to 50–70% of your pre-tax earnings.

• Flexibility on deferred periods (the waiting time before benefits start).

• Support services such as rehabilitation and return-to-work programmes.

Why Income Protection Matters

• The cost of living is rising: even short gaps in income can hit families hard.

• Statutory Sick Pay (SSP) is limited: just £116.75 a week (2025) for up to 28 weeks.

• Self-employed workers lack employer sick pay: making them especially vulnerable.

• Small businesses depend on key staff: losing an employee for months can disrupt operations.

Types of Income Protection

There isn’t a one-size-fits-all solution. The right policy depends on your job, family situation, and whether you’re arranging cover personally or through a business.

1. Standard / Comprehensive Cover

Designed for those in lower-risk occupations (e.g. office workers), these policies often include extra features at no extra cost, such as:

• Parent and child cover

• Death benefit

• Fracture cover

• Rehabilitation support services

• Guaranteed minimum monthly benefit (e.g. £1,500)

2. Personal Sick Pay (Riskier Jobs)

Manual and higher-risk occupations (builders, electricians, trades) can be more expensive to insure. Personal Sick Pay policies are designed for them, offering:

• Age-costed premiums (cheaper when younger, increase with age)

• Weekly or monthly claim benefits

• Guaranteed minimum payouts (e.g. £1,000/month)

💡 Example: LV=’s Personal Sick Pay option tailors cover for clients in riskier jobs who might otherwise struggle to get affordable protection.

3. Executive Income Protection (for Businesses)

Part of many providers’ Business Protection menus, this is designed for SMEs to cover the cost of providing sick pay benefits to key employees. Benefits are paid to the company, which then continues paying the employee’s salary.

Cost Factors and Occupation Risk

Insurers classify jobs into risk groups:

• Low risk: office, admin, managerial roles.

• Medium risk: retail, hospitality.

• High risk: construction, trades, manual labour.

The higher the risk, the higher the premium. That’s why tailored options like Personal Sick Pay exist — to make cover accessible where standard Income Protection would be costly.

For Business Owners: Protecting Your Team

For SMEs, Executive Income Protection offers peace of mind. Benefits include:

• Covering ongoing salary obligations if an employee can’t work.

• Helping businesses attract and retain staff by offering a valuable perk.

• Potential tax advantages (depending on how the policy is structured).

FAQs About Income Protection

Q: How much of my income can I protect?
Most policies cover 50–70% of gross earnings.

Q: How long do payments last?
Until you return to work, retire, or reach the end of the agreed benefit term.

Q: Is Income Protection the same as Critical Illness cover?
No. Critical Illness pays a one-off lump sum on diagnosis of specified conditions, whereas Income Protection provides ongoing income for a wider range of illnesses and injuries.

Q: Can self-employed people get cover?
Yes — in fact, they often need it more, as they don’t get employer sick pay. Personal Sick Pay products are designed for this group.

Next Steps

Income Protection is often overlooked, but it can be the difference between financial security and real difficulty if illness or injury stops you from working. Whether you’re an adviser recommending cover or a client exploring options, it pays to understand the differences between standard, personal, and executive policies.

Want to review your protection needs? Contact us for a tailored discussion about safeguarding income — whether for yourself, your family, or your business.