Income Protection: A Plain-English Overview
Income protection is a separate product to private medical insurance (PMI) and is regularly confused with it. PMI pays for treatment. Income protection replaces some of your earnings if illness or injury stops you working for an extended period. They’re complementary, not interchangeable.
This page is an overview only; Insured Health specialises in private medical insurance, not income protection. We’ve put it here because clients often ask about both, and getting the basics right matters before you commit.
What income protection actually does
A typical UK income protection policy:
- Pays a regular monthly benefit while you’re unable to work due to illness or injury
- Starts paying after a chosen “deferred period” (often 4, 13, 26 or 52 weeks)
- Continues paying until you return to work, retire, or the policy term ends
- Pays a percentage of your gross income; usually capped at 50-65%
- Has premiums that depend on age, occupation, smoker status, deferred period and benefit level
The benefit is normally tax-free if you’ve paid the premiums personally.
How it differs from private health insurance
A useful framing:
- PMI pays the hospital so you get treatment quickly
- Income protection pays you so you can afford to be off work while recovering
The two work alongside each other. PMI shortens the time before you receive treatment; income protection covers the bills if recovery still takes months. People with employer sick pay covering, say, six months may not need short-term protection, but anything beyond that is typically uncovered without an income protection policy.
How it differs from critical illness cover
Critical illness pays a single lump sum if you’re diagnosed with one of a defined list of serious conditions. Income protection pays a monthly amount while you’re medically unable to work, regardless of whether the illness is on a “covered conditions” list.
Income protection is generally considered more comprehensive for working-age adults whose primary risk is being unable to earn an income for a sustained period. Critical illness adds value where a lump-sum payment would be more useful; paying off a mortgage, for instance.
Self-employed and income protection
Self-employed people are the clearest case for income protection. There’s no employer sick pay, and Statutory Sick Pay (SSP) doesn’t usually apply. A long illness can wipe out an income entirely. Even modest income protection cover can be a meaningful financial backstop.
Premiums for self-employed people aren’t generally higher than for employees, but the underwriting may ask for more evidence of income.
Employed people and income protection
Employees with generous sick pay (six to twelve months at full salary, plus another period at half) often have less urgent need for short-term cover. The case is stronger for:
- People whose sick pay is only the statutory minimum
- Employees in roles where long absence might lead to redundancy
- Higher earners whose lifestyle would be hard to maintain on SSP alone
- Anyone in an industry with little appetite for re-employing people after long absence
Group income protection
Many employers provide group income protection alongside group PMI. It’s typically a fixed percentage of salary (often 50%) payable for a fixed period (often two or five years) if an employee is signed off. Group cover is usually cheaper and easier to access than individual cover, but ends when employment ends.
Underwriting
Income protection underwriting is generally stricter than PMI. Insurers ask about:
- Medical history (especially mental health, musculoskeletal issues, cancer)
- Occupation and duties
- Income
- Smoker status and lifestyle factors
- Hazardous activities and travel
Mental health and back-related conditions are the two areas where exclusions and rate increases most commonly apply, because they’re also the leading causes of long-term sickness absence in the UK.
What to think about if you’re considering it
A few practical questions:
- What does my employer actually pay if I’m off long-term? Many people don’t know.
- How long could I survive on savings if my income stopped tomorrow?
- What’s the most likely cause of being unable to work for me; accident, mental health, musculoskeletal, illness? This affects which policy structures work best.
- Do I want short-term cover (1-2 years payouts) or long-term (until retirement)?
A note on what we offer
Insured Health is an FCA-regulated broker focused on UK private medical insurance. We don’t currently advise on income protection. If you decide income protection is something you want to explore, you’ll want to work with a specialist protection broker who can quote the income protection market.
That said, we’re happy to talk through how income protection fits alongside PMI in your overall picture.
Frequently asked questions
Is income protection the same as health insurance? No. Health insurance pays for treatment; income protection pays a monthly benefit while you can’t work. They’re separate products that work well alongside each other.
Do I need income protection if I have private health insurance? PMI gets you treated faster, but doesn’t replace lost income while you recover. Whether you need income protection depends on your sick pay, savings, and dependants.
Is income protection tax-deductible? Personally paid premiums are not tax-deductible, but the benefit is usually paid tax-free. Employer-paid premiums for individuals are typically taxed as benefit-in-kind.
Are mental health claims covered? Yes; mental health is the leading cause of UK long-term sickness claims. Underwriting may apply exclusions for prior mental health, but new claims are payable on most policies.
For private medical insurance questions, we’re here at 0800 131 0400 or info@insuredhealth.co.uk. For income protection specifically, a specialist protection broker is the right next step.
