Is Income Protection worth it?

If you rely on your income to pay for your monthly outgoings, it’s worth thinking about what would happen if you could not work. While it can be tempting to think it won’t happen to you, an unexpected illness or injury could leave you unable to earn. That’s where income protection insurance comes in.

This type of cover pays you a tax-free percentage of your salary if you are too ill or injured to work. It can be valuable if you have limited savings, don’t get sick pay, or are self-employed. If you have family or loved ones that depend on your income, protection may be worth it for the peace of mind it offers.

Deciding whether to take out income protection and if it will be worth it for you, is a personal decision. Understanding the benefits of income protection insurance and how a plan could potentially help you is key to making a decision.

In this guide, you will learn about:

• Other types of insurance that may be suitable.
• What income protection is and how it works.
• The benefits of having this type of cover.
• How it compares with sick pay and other state benefits.
• What is and is not covered by a typical policy.
• A checklist to help you decide if you need it.

What is income protection insurance?

Income protection is an insurance policy that covers your wage if you can’t work due to illness or injury. You can’t guarantee your health, but protecting your income can help keep the bills covered if something unexpected happens.  

Income protection pays out a portion of your income, usually between 50% and 70%, after an agreed waiting period. This waiting period can be anywhere from one to 12 months. Typically, the longer the waiting period you choose, the lower your monthly payments, or premiums, will be.

For example, if you earn £50,000 a year and your policy covers 70% of your earnings, it will pay out £35,000 a year (£2,916 a month).

You can choose between short-term cover, which pays out for a set period like one or two years, or long-term cover. A long-term policy will continue to pay out until you are well enough to go back to work, you retire, or the policy ends.

Why you should consider income protection

Think about the things you insure: your home, car, holidays, and even your pets. But what pays for all those things? Your income.

Protecting your salary means you can maintain your standard of living, even if you become too ill to work. If your household savings would not be enough to cover the bills, income protection could help you pay for:

• Mortgage or rent payments.
• Household bills and food.
• Childcare costs.
• Car loans or transport.
• Holidays and hobbies.

Money worries can have a negative impact on your mental health, especially when you’re unwell. The main benefit of income protection is knowing your essential costs will be taken care of, so you can focus on recovery.

The benefits of income protection

• If your claim is approved, you’ll get a guaranteed percentage of your income and more money in your pocket compared to statutory sick pay.
• You can choose when your plan starts to pay out, in line with any sick pay you may get. For example, if you are entitled to three months of sick pay, then you can choose a waiting period to match this, so your payments start once sick pay ends. The longer your waiting period is, the cheaper your premium could be.
• The plan will usually pay out until you return to work, retire, or die. Plus, you can claim as many times as you may need, in line with your plan’s terms.
• In most cases, you’ll be covered for both physical and mental illness, although exclusions may apply for existing conditions.
• Income protection offers reassurance that you’re covered for a range of illnesses and injury, not just severe illness or disability.

There’s more on this subject in our article comparing Income Protection with Critical Illness Cover.

What about sick pay?

You may be entitled to sick pay from your employer or government benefits like Statutory Sick Pay (SSP). However, for many people this may not be enough to cover all their outgoings.

• Employer sick pay: Check your employment contract to see what your employer offers. Many will not pay sick pay for more than six months.

• Statutory Sick Pay (SSP): As of 2025,  the standard rate for SSP is £118.75 week for up to 28 weeks. This is significantly less than the average UK salary.

Always check your sick pay entitlement. You can time your income protection to begin when sick pay ends to avoid gaps in your income.

Income protection can be helpful for self-employed workers who might not get sick pay.

How income protection can help: some examples

To help you understand how a policy works in practice, here are some practical examples. The people and situations are fictional, and any premiums or salaries mentioned are for illustrative purposes only.

Rob, a 35-year-old HGV driver

Rob has a partner and two young children. Their combined incomes cover the mortgage and bills, with a little left over for savings. When a serious leg injury from a car crash stops him from working for five months, his sick pay is not enough to cover his share of the costs, and their savings start to run out.

Rob had an income protection policy with a 13-week waiting period, chosen to match his family’s savings buffer. After this period, his policy began paying out 50% of his usual income. This meant his family could continue to pay the bills and manage their costs until he was able to return to work.

Sarah, a 24-year-old living independently

Sarah works in a call centre and loves the independent life they have built away from the family home. When they get bacterial meningitis and are hospitalised for several weeks, they worry about being able to afford rent and bills while recovering.

When they started the job, Sarah took out an income protection plan for a small monthly payment. They chose a short waiting period of two weeks. The policy paid them 70% of their income each month until fully recovered, giving them the peace of mind that they could maintain financial independence.

Mary, a 57-year-old carer

Mary lives alone and is close to paying off her mortgage. When she is diagnosed with cancer and must stop working to begin treatment, she worries about her final mortgage payments and the upkeep of her house.

Years earlier, Mary had taken out an income protection policy. When applying, she had declared a previous back problem, and the insurer placed an exclusion on her policy for back-related issues. Because her current illness was unrelated to this exclusion, the claim was successful. Mary’s policy paid out every month until she retired,so she could keep her home and live without financial strain.

What income protection covers

Income protection is a broad type of cover designed to help with various situations.

Income protection typically covers:

• A percentage of your income if you are too ill or injured to work.
• Both physical and mental health conditions, depending on the policy.
• Multiple claims over the life of the policy.

It does not usually cover:

• Redundancy or being fired.
• Pre-existing medical conditions that you had before you took out the policy. Although some insurers may offer reviewable exclusions or to cover the pre-existing condition for a higher premium.
• Illness or injury because of a deliberate or self-inflicted act.

It is important to be honest about your medical history and lifestyle in your application. Leaving out information could result in your policy being cancelled or a future claim being denied.

A checklist to help you decide

Income protection can be a valuable safety net, but it is not right for everyone.

You may want to consider income protection if you:

• Rely on your income to pay for your rent, mortgage, and other living costs.
• Are self-employed and would not receive any sick pay.
• Have limited savings to fall back on.
• Get little or no sick pay from your employer.
• Have children or other dependants who rely on your income.
• Want to know you are protected against a wide range of illnesses and injuries.

It may not be right if:

• You’re concerned about losing your job for reasons other than health.
• Your savings could support you for a long period.
• Your partner or family could support you financially.
• You could comfortably live on your employer’s sick pay and any state benefits.

What are the alternatives?

It is useful to understand how income protection differs from other insurance products.

Critical illness cover: This pays out a one-off, tax-free lump sum if you are diagnosed with a specific serious illness listed in the policy, such as some types of cancer, a heart attack or stroke. It does not cover all conditions and is designed for severe illness.

Accident, sickness and unemployment (ASU) cover: This is a short-term policy that usually provides an income for up to 12 months if you cannot work due to illness, injury or redundancy. It is less comprehensive than income protection.

Mortgage payment protection insurance (MPPI): This is designed specifically to cover your mortgage payments for a limited time, usually 12 to 24 months.

How to get an income protection plan

If you have decided that income protection is right for you, the next step is to find a plan that suits your needs. You can get quotes directly from insurers or speak to an independent financial adviser who can compare policies for you.

When comparing providers, check for any added benefits they might offer. Shepherds Friendly’s plan includes extras like virtual GP appointments and gym membership discounts, which add value to your plan.

Always read the policy documents carefully, including the important information and key features, before deciding.

In summary

Deciding whether you need income protection insurance depends on your personal circumstances.

• What it is: Income protection provides a regular, tax-free income if you cannot work because of illness or injury. It covers a percentage of your salary, usually 50% to 70%.
• Who it is for: It is for anyone who relies on their income to pay for their living costs, especially those who are self-employed, have limited savings, or don’t get sick pay.
• What to consider: Think about your savings, your employer’s sick pay policy, and whether you could manage on Statutory Sick Pay (£118.75 a week as of 2025).
• How it works: You choose a waiting period before the payments start. You can set this to start when your sick pay ends. The longer the waiting period, the lower your monthly premiums.
• What it covers: Most policies cover a wide range of physical and mental illnesses that stop you from working. Some insurers may offer to cover pre-existing conditions for a higher premium.
• Alternatives: Other options include critical illness cover (for specific serious illnesses) and accident, sickness, and unemployment (ASU) cover, which is a shorter-term option.

Ready to take out a plan?

If you’re ready to insure your income, you’re taking a great step towards protecting your future.

Once you’ve figured out how much income protection you need, it’s time to get a quote.

You can get quotes yourself directly from insurers, or with the help of a qualified financial adviser. Either way, do your research and compare what’s on offer from different providers to find the right plan for you.

Our award-winning team has 96% claims paid rate over the past five years and can refer you to a range of rehabilitation services if you need them.

Sound good? You can find out more about Shepherds Friendly Income Protection Insurance and get a quote online.

The right type of insurance for you depends on your personal circumstances. If you are unsure which policy to choose, you can get in touch with a financial adviser, who will be able to take you through the options available.

Want to learn more? Check out the Shepherds Friendly blog for more helpful articles.

Be sure to read through our important information and key features. Remember that when you invest, your capital is at risk.