Income protection insurance is designed to help you if you aren't able to work due to illness or disability. If you are unable to work, income protection insurance replaces a portion of your income. This allows you to maintain your lifestyle as you recover and helps you pay those bills that you have incurred.

People commonly refer to this type of payment protection as disability or sickness insurance. For a plan to begin paying out, you must have an illness, injury or have suffered an accident.  Income protection insurance can cover you for short as well as long periods.


However, if you have had a permanent or life-changing disability, most plans will continue to pay until you reach the legal retirement age or death. The payments usually are a percentage of your income, and they are also tax-free. We've looked into this type of protection insurance and have the answers to commonly asked questions so you can decide whether you need it or not.

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Is Income Protection Insurance Necessary?

When you think about illness and being unable to get to work, you normally imagine yourself having the flu or a stomach bug. Typically, this shall only require a couple of days off work. But have you ever thought of having to be away from work for a longer period, for example as a result of an accident or a chronic illness such as cancer? And how you would manage without any wages coming in?

Many employers will still pay your salary while you are recuperating, but only for a certain period. In some cases, employers usually only pay for the first six months or one year, and then after that, they leave you hanging. Some companies will not even cover that length.


The state benefits you may be entitled to if you are not able to work as a result of illness or an accident are also unlikely to be sufficient to be able to cover your total costs. It is therefore surprising that only 9% of people have taken out some form of income protection insurance,

Do I Really Need It?

The simple answer is yes. It’s less a question of whether you can afford it, and more of whether you can afford not to have income protection insurance. None of us plan to be unwell or involved in an accident, but the sad truth is that it can happen to any of us, at any time. Being prepared for this eventuality is extremely important because worrying about how you are going to continue paying your mortgage when you are dealing with a serious illness, is the last thing you want to do.

How Does Income Protection Work Insurance Work?

The monthly benefit

The first thing you need to do is determine your total expenses, so you can know how much you would wish to receive in the event of a situation that renders you unable to work. This is what the insurance company shall send you each month.  Most people go for 50% of their monthly salary, while others go for 100% of their income.


The more you wish to receive, the more the monthly premiums shall be. Experts suggest 60-70% as a sensible figure that would allow most people to cover their bills and basic expenses.

The deferment period

You must also identify the length of time you shall be out of work before the benefits kick in. Generally, the longer the deferment period on your plan, the lower your premiums will be. The usual deferral period is 13 or 26 weeks, but it can be as low as four weeks if you are prepared to pay for this type of higher cover.

The benefit payment period

This is the length of time you wish to receive the money. Of course, the longer the period, the higher the premiums. The insurance company will always have clear definitions as to what constitutes illness and incapacitation so that you are clear the circumstances you shall be covered, and when you shall not.

If you fall ill, the insurance company will start to pay you a monthly benefit after the deferred period. These payments continue until you either go back to work or your insurance term comes to an end. Some policies also offer you the ability to claim multiple times.

How Much Do I Need?

The maximum amount available will depend on the chosen insurer. It typically ranges from 50% - 75% of your current income. You can also choose to have more than one policy, of course, depending on your ability to pay but insurers will usually place a cap on how much payment protection you can have. Bear in mind that state benefits for illness are very little and they may not cover you completely.

Is Income Protection Insurance Worth It And Why?
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Is Income Protection Insurance Worth It Conclusion

We sometimes take out health for granted, and the reality is that we do not know when we shall need this kind of protection. Take for example the current Coronavirus crisis, many people are infected with the virus and worried about their expenses. With income protection insurance in place, you need not worry about your expenses as the insurance company shall take care of you until you recover.