6.3 Income Protection Insurance: How to Safeguard Your Pay Check
No-one expects to be unable to work. But it could happen. Here's how to protect your escape plan if it does
No one wakes up on a Tuesday expecting their income to vanish.
But it happens.
A car accident. A long illness. A mental health spiral that doesn’t pass in a week.
Suddenly, the work stops. But the bills don’t.
Mortgages still want paying. The supermarket still charges for food. Your escape plan — that careful build-up of assets — just met its greatest threat: no income.
This is where income protection insurance steps in. Quietly, unglamorously, but powerfully. Like a financial backup generator you hope you never need — but are grateful to have when everything else shuts down.
What Is Income Protection Insurance?
Income protection insurance is designed to replace part of your income if you're unable to work due to:
Accidents
Long-term illness
Physical or mental health conditions
It’s not for redundancy — that’s a separate risk.
It’s not a lump sum payout — that’s critical illness cover.
Instead, income protection is monthly support that kicks in when you can't earn, and continues until you're either better, your policy ends, or you reach retirement.
Among the different types of cover, income protection is often the most comprehensive — fewer exclusions, more reliability, and real peace of mind.
What Are the Levels of Cover?
Insurers define "unable to work" in a few different ways. And this definition matters — it’s the difference between being covered and being declined.
1. Own Occupation
Covers you if you can’t do your actual job.
If you’re a teacher and can’t teach, it pays out — even if you could technically do admin work somewhere else.
✅ Most comprehensive
💷 Slightly pricier, but often worth it
2. Suited Occupation
Covers you only if you can’t do your job or any similar job you’re qualified for.
That means: if you were a pilot, but could still be an instructor — no payout.
⚠️ Less generous. Read the fine print.
3. Activities of Daily Living
This one’s brutal. It only pays out if you can’t do basic tasks like dressing, feeding yourself, or walking.
It’s cheap — and for good reason.
Often a false sense of security.
What’s a Deferral Period?
Income protection doesn’t pay out instantly. You choose a deferred period — a delay between stopping work and receiving payments.
The longer the wait, the cheaper the policy.
Common deferral periods:
4 weeks
13 weeks
26 weeks
1 year
Think of it as your financial buffer zone.
💡 Tip: Match it to your safety net
If you’ve got:
3 months emergency fund, and
Statutory Sick Pay for 28 weeks
...you could afford a longer deferral period — and get a cheaper policy.
How Much Does It Pay?
Typically, up to 70% of your gross salary — enough to cover:
Mortgage or rent
Utility bills
Groceries
Essential living costs
That might not sound like much — but here’s the thing:
It’s tax-free. And it rises with inflation.
So you sidestep two of the biggest money traps — tax and inflation — even while you’re not working.
How Long Does It Pay Out?
Your policy pays until one of three things happens:
You’re well enough to return to work
The policy term ends
You reach retirement
Most people set the end date to line up with either:
Their planned retirement age, or
The end of their mortgage
If you’re building towards financial freedom, it’s okay to set it slightly earlier — as long as your escape plan will cover you from there.
Where Can You Buy It?
Independent financial advisers
Directly from insurers
Comparison sites (but be careful — not all policies are equal)
Specialist brokers, especially if you have pre-existing health conditions
Cost varies depending on your age, health, job, and the type of cover you choose. But remember:
You’re not paying for growth. You’re paying for protection.
Recap
It replaces part of your income if illness or injury stops you working
“Own Occupation” cover is the most reliable and comprehensive
Longer deferral periods = cheaper premiums
Pays out tax-free, often adjusted for inflation
Choose a policy that lasts until retirement or mortgage freedom
You won’t get rich from income protection. But it might stop you going broke.
It’s not sexy. It’s not exciting. It’s just smart — and for some, life-changing.
Next up, we’ll take this and combine it with the rest of your protection options into one clear, affordable plan.
Up Next: Setting Up Your Protection Plan
https://www.drewberryinsurance.co.uk/income-protection-insurance
Disclaimer: This content is for informational and educational purposes only. It does not constitute personal financial advice. Everyone’s situation is different — if in doubt, speak to a qualified, regulated financial adviser.