Is it worth having income protection?
Is it worth having income protection?
Most people insure their car without a second thought. Far fewer give the same attention to their income, which is arguably their most valuable financial asset. If you were suddenly unable to work due to illness or injury, how long could you realistically manage before the bills became unmanageable?
Income protection insurance exists to answer that question before the crisis arrives. It pays a regular, tax-free income if you are unable to work, typically covering between 50% and 70% of your gross salary, and it keeps paying until you recover, reach retirement age, or the policy term ends.
Is It Worth Paying for Income Protection Month After Month?
The honest answer depends on your circumstances, but for the majority of UK workers the answer is yes. According to the Association of British Insurers, the average income protection claim lasts around five years. Without a policy in place, five years of lost earnings would devastate most household finances regardless of savings.
The cost of a policy varies considerably based on your age, occupation, health history, and the deferred period you choose. A longer deferred period (the waiting time before the policy pays out) reduces your premium significantly, so aligning that period with your employer’s sick pay entitlement is a sensible approach many advisers recommend.
| Policy Deferred Period | Typical Monthly Premium Impact | Best Suited To |
|---|---|---|
| 4 weeks | Highest premium | Self-employed with no sick pay |
| 13 weeks | Moderate premium | Employees with short-term sick pay |
| 26 weeks | Lower premium | Employees with 6 months’ sick pay |
| 52 weeks | Lowest premium | Those with substantial savings buffer |
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Is It Good to Have Income Protection Insurance as a Self-Employed Worker?
For the self-employed, income protection is not just good to have; it is arguably essential. There is no employer sick pay, no statutory top-up beyond the standard Statutory Sick Pay rules (which self-employed workers typically do not qualify for at all), and no safety net beyond savings.
This makes the self-employed some of the most financially exposed workers in the UK. A plumber in Bristol or a freelance designer in Manchester who cannot work for six months faces the same fixed outgoings but zero guaranteed income, which is precisely the gap income protection is designed to fill.
What Does Martin Lewis Say About Income Protection Insurance?
Martin Lewis, founder of MoneySavingExpert and widely regarded as the UK’s most trusted consumer finance voice, has consistently highlighted income protection as one of the most undervalued financial products available to working adults. He has described it as frequently more important than life insurance for people of working age, particularly for those with dependants or significant financial commitments.
His reasoning is straightforward: statistically, you are far more likely to experience a long-term illness or injury during your working life than you are to die. Yet the majority of UK households carry life cover and neglect income protection entirely, leaving the more probable risk completely uninsured.
What Does Martin Lewis Say About Life Insurance Compared to Income Protection?
Martin Lewis has drawn a clear distinction between life insurance and income protection on multiple occasions, noting that while life insurance pays out on death, income protection pays out when you arguably need it most: while you are still alive and still have bills to pay. He has suggested that for many people, particularly younger workers without significant assets, income protection should be considered before life insurance.
This perspective challenges the conventional order in which most people think about financial protection. Life insurance is heavily marketed and widely held, while income protection remains relatively niche despite covering a risk that affects hundreds of thousands of UK households every year.
| Product | What It Covers | Who It Pays Out To | When It Pays Out |
|---|---|---|---|
| Income Protection | Illness or injury preventing work | Policyholder directly | During the claim period |
| Life Insurance | Death of the policyholder | Named beneficiaries | On death |
| Critical Illness Cover | Specific listed conditions | Policyholder (lump sum) | On diagnosis |
| Payment Protection Insurance | Specific loan/mortgage payments | Lender directly | On qualifying event |
Is Income Protection Insurance Worth It? Understanding the Real Risk
One of the most common objections to income protection is the assumption that the state will step in. In reality, the UK’s statutory sick pay provision is modest: as of 2025, Statutory Sick Pay stands at £116.75 per week for a maximum of 28 weeks, paid by your employer. For the average UK worker earning around £35,000 a year, that represents a dramatic reduction in income almost immediately.
The UK government’s guidance on Statutory Sick Pay confirms the limitations clearly, and the Money and Pensions Service provides free, impartial guidance for anyone wanting to understand their state entitlements before buying a policy. Understanding what the state does and does not cover is the single most important step in evaluating whether private income protection is worth the cost.
Beyond the numbers, there is a practical reality that often goes unacknowledged. Most people have experienced someone close to them who has faced an unexpected health event, whether a friend diagnosed with cancer in their forties, a colleague who suffered a back injury that kept them off work for over a year, or a family member dealing with a mental health condition that made returning to work genuinely difficult. These are not rare occurrences and income protection exists precisely for these situations.
Is It Worth Having Income Protection? Making the Decision That's Right for You
Whether income protection is worth having ultimately comes down to three questions: how long could you survive financially without your income, does your employer provide meaningful long-term sick pay, and do you have dependants or significant financial commitments that would be affected by a sudden income loss? If the honest answer to any of those questions leaves you feeling exposed, that is a strong signal that a policy deserves serious consideration.
The premiums are not trivial, but they are far lower than most people assume, particularly when a policy is taken out at a younger age. A 30-year-old non-smoker in a low-risk occupation can typically secure a meaningful level of cover for less than the cost of a streaming subscription each month. Delaying the decision tends to increase both the premium and the risk of being declined or loaded due to health changes.
Speaking to a regulated financial adviser before committing is always the recommended route. The Financial Conduct Authority’s register allows you to verify any adviser’s credentials, ensuring that the guidance you receive is both trustworthy and appropriate to your individual circumstances. Income protection is not a one-size product; the right deferred period, benefit amount, and policy type all depend on your specific financial picture.
- Income protection pays a regular tax-free income if you are unable to work due to illness or injury, typically covering 50–70% of your gross salary until you recover or reach retirement age.
- Martin Lewis consistently rates income protection as one of the most undervalued financial products in the UK, noting it covers a statistically more likely risk than death during working age.
- Before buying, understand your employer’s sick pay terms, check your state entitlements via the Money and Pensions Service, and verify any adviser through the FCA register.
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Is It Worth Having Income Protection? Frequently Asked Questions
Income protection insurance is a long-term policy that pays a regular, tax-free income if you are unable to work due to illness or injury. You can find a comprehensive overview on the Wikipedia page for income protection insurance.
Most policies cover between 50% and 70% of your gross salary, though the exact percentage depends on the insurer and the policy terms you choose. Some policies also factor in any state benefits you receive during a claim.
No; income protection pays a monthly benefit for as long as you cannot work, whereas critical illness cover pays a one-off lump sum upon diagnosis of a specific listed condition. They serve different purposes and many people hold both.
Yes, and it is particularly important for self-employed workers who have no access to employer sick pay. Premiums and terms vary, so comparing policies from multiple providers is advisable.
The deferred period is the length of time you must be off work before the policy begins to pay out, commonly set at 4, 13, 26, or 52 weeks. Choosing a longer deferred period reduces your monthly premium.
Most comprehensive income protection policies do cover mental health conditions, including anxiety and depression, which are among the leading causes of long-term absence in the UK. Always check the specific policy exclusions before purchasing.
Martin Lewis of MoneySavingExpert has consistently described income protection as one of the most important and underused financial products available to UK workers. He argues it covers a more probable risk than death during working life, yet far fewer people hold it compared to life insurance.
Payment protection insurance (PPI) covers specific loan or mortgage repayments only, whereas income protection replaces a portion of your overall income and can be used for any outgoings. PPI also attracted widespread mis-selling concerns in the UK, while income protection is a separately regulated, long-term product.
If your employer offers generous long-term sick pay, you may need less cover in the short term, but few employer schemes extend beyond 12 months. Income protection with a longer deferred period aligned to your employer’s sick pay can be a cost-effective way to cover the gap beyond what your employer provides.
Statutory Sick Pay is paid by your employer for up to 28 weeks and does not affect a separately held income protection policy once your deferred period has passed. The UK government’s Statutory Sick Pay guidance sets out current rates and eligibility in full.
The earlier you take out a policy, the lower your premium is likely to be, as you are statistically healthier and less likely to have pre-existing conditions that could affect your terms. Many advisers recommend putting it in place as soon as you have financial dependants or a mortgage.
Yes, and holding both is common practice among those who want comprehensive financial protection. They cover different risks and pay out under different circumstances, so they complement rather than duplicate each other.
Benefits paid from a personally held income protection policy are generally paid free of income tax. If the policy is held through an employer as part of a group scheme, different tax rules may apply, so it is worth clarifying with an adviser.
You should always use a regulated financial adviser listed on the Financial Conduct Authority register, accessible at fca.org.uk. An independent adviser can compare policies across the whole market rather than being limited to a single provider’s range.
Further Reading on Income Protection Insurance
For those seeking to understand the complexities of income protection insurance, we’ve assembled comprehensive guidance on selecting appropriate coverage, including how to evaluate different policies, interpret insurance terms, and ensure you’re securing the most suitable protection for your specific circumstances and income requirements.
