Income Protection Insurance

Every year approximately one million UK adults find themselves unable to work for a prolonged period due to illness or injury. If this happened to you, would you be able to pay your regular outgoings such as mortgage payments and utilities? If the answer is no, then you may want to consider Income Protection Insurance.

What is Income Protection

Income protection is a type of insurance that pays out a monthly sum of money if you become ill or suffer an injury that prevents you from working. It is designed to provide a regular income that will help you meet your monthly financial commitments.

Typically, you will receive payments until death, retirement or you become well enough to return to work. Income protection does not payout if you are made redundant.

Key Features

  • You will receive a regular monthly sum. The payment is a percentage of your monthly earnings before tax (Normally around 60%). The figure is agreed at the start of the policy
  • Most illnesses are covered, although you should always check the insurer’s exclusions before setting up a policy
  • Income protection payments are typically tax-free
  • Payments commence after an agreed deferred period has passed. The longer the deferred period, the cheaper the insurance policy may be

Who Needs Income Protection

The decision to take out Income Protection insurance is a personal one and should be based on an individual’s circumstances.

If you have regular monthly outgoings such as mortgage payments and household bills, then you need to consider how they will be paid should you be unable to work for a prolonged period of time.

The UK government does provide financial support for those who are unable to work due to illness or injury. If you are employed, you may be able to claim Statutory Sick Pay (SSP) which, at the time of writing (July 2020), paid out £95.85 per week for up to 28 weeks.

Once the 28 weeks of SSP have elapsed, you may also be able to claim other benefits such as Employment and Support Allowance (ESA), Universal Credit or Personal Independence Payments (PIP).

If you don’t feel state benefits will be sufficient to cover your regular outgoings, or, you would prefer the peace of mind an insurance policy offers then Income Protection may be for you.

How Does it Work?

Every provider will have their own set of criteria when it comes to setting up an Income Protection policy. However, you will need to consider the following points;

  • How much monthly income would you like to receive (this is typically capped as a percentage of your current salary)
  • The deferral period. You can decide not to receive payments immediately and instead agree a deferred period (e.g. 3 or 6 months) after which payouts will start. A longer deferred period can reduce the cost of the policy
  • How long would you like the cover to last?

You should also check with providers that the policy is ‘Index-Linked’. This means that the payments made by your income protection policy will rise with inflation. Index-linked policies may cost a little more, but you will see the benefits should you require long term payouts.

How Much Does it Cost?

Depending on your circumstances, there are a number of fees that could be applicable in your remortgage process.

Income protection is paid monthly for the duration of the policy. How much you pay will depend on the policy, the provider and your own personal circumstances.

Providers will take the following factors into account when calculating the cost of a policy;

  • Your age
  • Your occupation
  • If you smoke or have ever smoked
  • The percentage of your income you’d like covered
  • The deferred payment period
  • Your health
  • Your families medical history


Income protection provides financial security should you become unable to work. If you don’t feel you could meet your current outgoings if you did have to stop working due to illness or injury, then this type of insurance could be a suitable option.

At Elementary Mortgage Solutions, we work with a broad panel of insurers. Our experts will assess your situation and suggest the most suitable policies for you based on your personal circumstances.

If you’d like to discuss Income Protection or any other kind of insurance, please contact our team.

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