Income Protection Insurance

Income Protection insurance, also known as Permanent Health insurance (or PHI) is a little bit like sick pay from work. Due to things like PPI back in the day many people think it is a con or wont pay out.

This article might make you reconsider…

What is Income Protection?

As mentioned above, Income Protection works a little bit like sick pay from work. Lets assume your annual income is £20,000. You can generally insure around 60% of your grass annual income, in this case £12,000. For the smart ones, that is around £1,000 per month. Employed, you would be taking home £1,468 pm minus any deductions for pension payments.

You can take out this policy to cover you for a certain period or until your retirement age (whichever is earlier). As an example if I was 35 years old and plan to retire at 68, I could do a maximum term of 33 years. But if cost is an issue or I only want the policy in place until I am say 50, then you can do a 15 year term instead.

Every month it will pay out £1,000 if you are unable to work. £12,000 a year. If you became ill at 45 years old and the policy ran until you were 68, it would pay out £1k a month for 23 years (Approximately £276,000). You can also set up the policy to pay out an increasing amount to rise with inflation if you wish. Your £1,000 a month might not pay for too much in 23 years time.

Will it pay out?

This is obviously the big question isnt it. Any insurance articles you read in the paper are always the negative ones. It is understandable you might have your doubts so rather than babble on I will just post some statistics for you:

I could list more but I think you can see it is safe to say around 90% or more of claims are paid out.

Some other stats from the link above for LV:

  • The average claim was in place for over 5 years – how long is your sick pay at work?
  • The average age of a claimant is 45 years old.
  • The youngest was 22 years old!

How much does it cost?

This is the other big question. It is impossible to give an answer as it is dependent on a number of things such as your age, your health, your occupation, how long you want the policy to run for.

In general, if you are under 35 and in an office/admin type job then premiums should be reasonable price. If you are working on a building site then premiums will be higher as the job is riskier.

I took out a policy in my early thirties and it was around £30 a month for £1,000 worth of cover.

Does it do anything else?

This is something that has started to come in over the last 5-10 years. Insurance providers are offering add-ons, some are included in the price others are an optional extra. Some examples include:

Fracture cover – this means if you break a bone, you can receive a cash pay out. This seems to be quite popular for people who play football or other sports.

Best Drs – this is something I have myself (and have used twice). This is where you can send off your Drs reports to get a second opinion on the diagnosis and best form of treatment. Your GP may base treatment on what is available on the NHS but there may be better options available elsewhere, you may want to know about those to improve your chances of recovery?

GP appointments – its no secret that getting a GP appointment at the minute can be difficult. Some of these policies offer the ability to have a certain number of private GP appointments which can be done over zoom.

In short, there are 2 types of policy, cheap and cheerful and it will offer basic cover and thats fine as that may be all you want. There are also more comprehensive policies which cover some of the above – a little like your car insurance policy. Some may have windscreen cover, others it might be an option extra and some may not include it at all.


I am a very big fan of income protection. For me personally, I think it should be the starting point of any discussion around Protection insurance. If you are unable to work, it affects your ability to pay your mortgage or rent, it affects your ability to live your life and also pay for things like Life insurance which is typically the first policy people think of when talking about Protection insurance.

If you would like to know more, we are more than happy to discuss it with you – no cheesy insurance salesman sales targets here.