Wojciech
Diploma for Financial Advisers
Diploma in Accounting
Member of London Institute of Banking and Finance
Life is unpredictable. Whether it’s an illness, an injury, or an unforeseen event that leaves you unable to work, your income could suddenly come to a halt. This is where the question arises: is income protection worth it in the UK?
Let’s explore what income protection is, how it works, and whether it’s something you should consider.
What Is Income Protection?
Income protection is an insurance policy that pays you a percentage of your salary if you’re unable to work due to illness or injury. It typically covers up to 50%-70% of your income and continues to pay out until you’re able to return to work or retire, depending on the policy terms.
Is Income Protection Necessary in the UK?
In the UK, statutory sick pay (SSP) provides only £116.75 per week (as of 2024) for up to 28 weeks. For many, this is nowhere near enough to cover monthly expenses like rent, mortgage payments, bills, or childcare. If you’re self-employed, SSP isn’t even an option.
Income protection ensures you can maintain your lifestyle and meet financial commitments even if you’re unable to work for a long period. For many people, this makes it worth considering.
Who Should Consider Income Protection?
While everyone benefits from a safety net, income protection is especially useful if:
- You’re self-employed or freelance – You won’t receive sick pay.
- You’re the primary earner – Your family depends on your income.
- You have a mortgage or other loans – Missing payments could lead to financial trouble.
- Your employer’s sick pay is limited – Many companies offer only a few weeks or months of paid sick leave.
What Does Income Protection Cover?
Most policies cover illnesses, injuries, or long-term health conditions that prevent you from working. However, it’s important to note that income protection doesn’t usually cover redundancy. If job security is your concern, other insurance types, like redundancy protection, might be more suitable.
Factors to Consider When Choosing a Policy
- Waiting Period
The waiting period (or deferral period) is how long you need to be off work before payments start. A longer waiting period usually lowers premiums but requires more savings to cover the gap. - Coverage Level
Decide how much of your income you need covered. While 50%-70% is standard, some people opt for lower coverage to reduce premiums. - Policy Type
- Own Occupation: Covers you if you can’t perform your specific job.
- Any Occupation: Covers you only if you can’t work at all in any role.
- Premium Type
- Guaranteed: Premiums stay the same throughout the policy.
- Reviewable: Premiums can increase over time.
How Much Does Income Protection Cost in the UK?
The cost varies based on your age, occupation, lifestyle, and the level of cover you choose. On average, premiums range from £15 to £100 per month. While this might seem like an extra expense, it’s a small price to pay for peace of mind.
Is Income Protection Worth It in the UK?
The answer depends on your personal circumstances. If you could manage months without income using savings, you might not need it. However, for most people who rely on a regular salary to cover expenses, income protection offers a valuable safety net.
In the UK, where sick pay is limited, and many are self-employed, the need for income protection is increasingly clear. It provides financial stability when you need it most, making it worth considering for anyone who values long-term security.
Final Thoughts
While no one likes to think about being unable to work, preparing for the unexpected is key to financial stability. If you’re asking yourself, “Is income protection worth it in the UK?”, the answer lies in your ability to manage without your income. For many, the peace of mind it brings makes it a worthwhile investment.
Before committing to a policy, shop around, compare quotes, and read the small print. Protecting your income means protecting your future.
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