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Income protection insurance – what is it and why do I need it?

Updated: Jun 2, 2023

Imagine if you couldn’t work because of an illness or injury – income protection insurance could support your financial needs for as long as you need.

You’ve probably heard the term “insurance” being thrown around in adult conversations (no, I’m not referring to us as adults, I don’t relate to that term, sorry). And you might even have some form of insurance yourself whether that’s for your car, health, home, life or even travel (look at you having your life together, go you!).

Insurance basically financially protects the thing we insure – so if you’ve insured your phone or laptop and it gets stolen, your insurance company will pay out the cost of your device so you can replace it.


When you take out an insurance policy on something valuable to you, you have to pay a certain

amount every month or year (it’s called a premium) to keep the policy going – kind of like a fee for the insurance company to keep protecting whatever you insured. If you stop paying it, your insurance expires and you’re no longer protected.

Insurance policies also come with a set of rules –

outlining what situations they would cover you in, how they will protect you or how much they will pay out if something happens (it’s never unconditional, my friend).


There’s one particular type of insurance I’d like to cover today (pun intended) – income protection insurance. And as the name suggests, it protects your income. Here’s the lowdown on income protection insurance, how it works and why you should get it.

What is income protection insurance?

Income protection insurance is a financial product that replaces your income if you’re unable to work because of an illness or injury.

I know it’s not the best thing to be thinking about (#positivevibes and all), but imagine if you were in a car or cycling accident, or you were struggling mentally and really needed some time off, or even something more scary like cancer? Income protection insurance could save you from running out of money when you’re unable to make that dough.

Why income protection insurance?

Well, you might tell yourself that you could just take sick leave from work if you needed to – but some companies only pay sick pay for a few weeks. You could also be eligible for state benefits, but did you know it only pays out just over £100 a week?! That doesn’t even cover Anna’s plant addiction.

Or maybe you’ve been super responsible and you’ve got enough savings or an emergency fund to last you for a while – but how long will that really last you (personally, I would rather spend my savings on that Vietnam trip I’ve been planning for 4 years).

And with more and more Squigglers loving that freelance lifestyle (who doesn’t love setting their own working hours?!), your income could be dependent on how much you can work. And if you can’t work, you can’t earn.

All in all, your expenses will probably remain the same, even when you’re not getting income for a while, and your savings, sick leave and state benefits will only last you so long. Income protection insurance can cover you for as long as you need it and for anything that stops you doing your day job* (unless you get fired or become unemployed).

*Sorry, I have to be one of those people and cover my own behind. All income protection policies are different, and you should really speak to your financial adviser (the expert) on what’s right for you, and how different policies work. Want help finding an expert, click here!

How much does income protection insurance pay out and how much do I pay in?

As my disclaimer said, that’s a good question to ask your financial adviser for the specific details on your own policy.

But typically, insurers pay out between 50% to 70% of your income if you can’t work. And you don’t have to pay income tax on it (hehe!). Zayne’s been kind enough to explain his experience if you scroll further down to give you a better idea of how exactly it worked for him.

And obviously, nothing is free, you do have to pay a premium every month depending on which

insurer you go with so they protect your income. How much you pay for protection depends on loads of things like your age, medical conditions, whether you smoke, your type of job, and more. All this means is that you’ll get a policy that’s tailored to you and how risky your job and

lifestyle is. The riskier is it, the more premium you’ll have to pay (because insurers think you’re more likely to claim).

You might think “oh, I’m young and healthy, I won’t need it anytime soon”. Well, it’s actually better to get it when you’re young and healthy because it means you’re more likely to pay a lower premium every month!

Why Zayne is glad he got income protection insurance

So I’ll give you some high-level deets on how it worked for me.

I’m not sure if you’re aware, but I recently got diagnosed with a long-term medical condition that sometimes puts me out of work for a couple of months or so. Luckily (being an overthinker and all), I had taken out both health insurance (to cover my medical bills) and income protection insurance (to cover my day-to-day expenses and rent).

I earn about £24,000 a year (I’m not shy about disclosing that) and my income protection policy covers 60%. That means I’ll usually get paid (60% of £24,000) = £14,400 over 12 months (or £1,200 every month for as long as I need it).

Thank goodness I didn’t have to do the maths, but it’s probably a good idea to check your policy yourself too, so you know what to expect. And that £1,200 a month really helped me stay on my feet and continue living with my mates at flat 15 (rather than move back home!) for the 4 months I was struggling!


Insurance might seem like a pointless thing to get, especially when we’re all young and healthy and thriving.

But if there’s anything the last year or so has taught us, it’s that life can be unpredictable. And planning for the unexpected is always worth it. If you have any questions about income protection insurance, get in touch with your financial adviser or head over to our help section (we’re off on Sundays for brunch, but we’re around any other time!).

We've partnered with the experts at Caspian Insurance who can help you to find the right income protection insurance policy based on your personal needs. Click below to find out more.


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