Income protection insurance: what are the different levels of cover and which is right for me?

Last updated by on July 21st, 2020

Deciding that you need income protection is a big step towards making sure you can keep up with essential expenses if you became unemployed or were too ill to work.

However, with so many options it can be hard to pinpoint what’s best. Here, we explore what’s available so that you can find the right policy for you.

What is income protection?

Income protection provides you with a monthly tax-free income if you’re unable to work through no fault of your own. The amount of money you receive is a percentage of your monthly salary, usually anything up to 65 per cent.

Different income protection policies cover different situations so the right one for you will depend on what risks you want to cover.

What are the different types of income protection insurance?

Income protection comes in lots of different forms, but they broadly fall into either short term or long-term policies.

Short term policies cover you for a limited period of time – usually 12 or 24 months. These are aimed at providing you with temporary support until you get back into work.

Long-term policies are sometimes called ‘permanent health insurance’ and cover you if you cannot go back to work because of sickness or injury. These plans usually pay out until you reach a certain age, pass away, or recover and go back to work.

The different types of income protection insurance available are:

    Unemployment insurance – this covers you if you become unemployed through compulsory redundancy (it’s also sometimes known as ‘redundancy insurance’).
    Accident and sickness insurance – this covers you if you cannot work because of an accident or illness.
    Accident, sickness and unemployment insurance – this provides combined cover for unemployment, accident and sickness – it’s sometimes shortened to ASU cover.

For more information, see our helpful guide – Comparing the types of income protection insurance.

Is income protection the same as PPI?

In short – no, income protection isn’t the same as PPI (payment protection insurance) but it’s easy to confuse the two.

The difference is that income protection gives you a monthly income to replace your usual salary and it’s entirely up to you how to spend the money – in most cases it’s aimed at covering mortgage, rent and everyday living costs. Income protection is also paid directly to you.

PPI, on the other hand, covers a particular debt (for example credit card debt) and unlike income protection, the money is paid to the lender rather than you.

PPI is usually linked to credit and was historically a forced purchase by banks and credit companies. Income protection is personal protection designed around your needs and independent of anything else, but can cover all mortgages, debts, credit, bills and lifestyle expenses.

How much does income protection cost?

The price of your premium depends on your own unique circumstances and insurance providers will take into account factors like:

    How old you are – insurance typically increases with age and declining health.
    How healthy you are – depending on the type and length of cover, insurers will sometimes want to know what sort of lifestyle you lead; whether you smoke, how much alcohol you drink, how much you weigh, whether you take any exercise and your full medical history.
    How much cover you want – the more cover you want, the more expensive your premium is likely to be.
    The length of the policy – the longer the policy term, the more expensive the premium.
    Your job – if you have a dangerous job (for example, demolition work) then this will be reflected in your policy price.
    The deferred period – all policies will have a deferred period, it is the length of time between making a claim and receiving the first payment. Increasing your deferred period can lower your premium.

If you’re looking for more information about how income protection works, then read our Income protection insurance explained guide.

Searching for income protection insurance

There’s lots to think about when it comes to income protection but the main areas to consider are:

    What risks do you want to cover yourself for? – for example, combined accident, sickness and unemployment cover is unnecessary if your employer already provides cover for accident and sickness (in which case you might only need unemployment cover).
    How much cover do you want? – work out what your essential outgoings are, this will give you an accurate figure to start from. Remember; the higher the benefit, the more expensive the premium.
    Do you want a short-term or long-term policy? – consider which option would best suit your budget and circumstances.

Comparing quotes online at gives you the best opportunity to see a range of policies meaning you can make an informed decision about what’s available and for how much.

Or, if you’d prefer to get a quote over the phone please call 0330 022 4685 and one of the team will be happy to help.

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