Statutory Sick Pay rises to £123.25 a week from 6 April 2026 — about £534 a month. If your mortgage, rent, food and bills add up to more than that (and for almost everyone they do), being unable to work for any extended period is a household-level financial crisis waiting to happen.
That’s the gap income protection insurance is built to fill. It pays you a regular monthly income — typically 50–70% of your usual pre-tax salary — if illness or injury stops you working. This is the complete UK guide for 2026: what it costs, how short-term differs from long-term cover, how it compares to critical illness and life insurance, and how to choose the right policy.
What is income protection insurance?
Income protection (sometimes called permanent health insurance or PHI) replaces a percentage of your gross salary if you can’t work because of any illness, injury or disability covered by the policy. Unlike critical illness cover, it doesn’t have a tight list of named conditions — broken bones, back pain, mental health and stress-related conditions, post-surgery recovery, long-term physical illness, all qualify.
Payments start after a deferred period you choose (usually 4, 8, 13, 26 or 52 weeks) and continue until you go back to work, the policy ends, or you reach retirement.
How much does income protection cost in 2026?
The biggest factors are your age, occupation, smoker status, deferred period and whether you choose short-term or long-term cover. As a rough rule it lands at 1–3% of your gross annual income.
The pattern matters: starting at 25 costs less than half what starting at 50 does, and once you’ve locked in a guaranteed-premium policy, that price doesn’t rise for the lifetime of the cover even as you age. Almost all advisers recommend taking out income protection as early as is affordable for this reason.
Short-term vs long-term cover
| Short-term IP | Long-term IP | |
|---|---|---|
| Pays out for | 1, 2 or 5 years per claim | Until you go back to work, retire, or the policy ends |
| Typical cost (age 30) | £8–£15/month | £17–£25/month |
| Multiple claims | Yes — full benefit period available again | Yes — but policy can be reviewed |
| Best for | Renters, low-cost savings buffer, employees with sick pay | Mortgage holders, families, self-employed |
| Risk it doesn’t cover | Long-term illness beyond benefit period | Premium can be higher |
If money is tight and you have to choose, short-term income protection covers the most likely scenarios (most claims are resolved inside two years) at a fraction of the cost of long-term cover. Long-term cover is the gold standard if you have dependents and a mortgage.
Income protection vs critical illness vs life insurance
These three sound similar but solve different problems. The simplest way to think about it:
- Income protection protects you while you’re alive but unable to work.
- Critical illness cover pays a lump sum if you’re diagnosed with a specific named illness — even if you can still work.
- Life insurance pays a lump sum to your family when you die.
| Income protection | Critical illness | Life insurance | |
|---|---|---|---|
| Payout type | Monthly income | Lump sum | Lump sum |
| Triggers | Any illness/injury stopping you working | Diagnosis of a named condition | Death (sometimes terminal diagnosis) |
| Covers mental health, back pain, broken bones | Yes | No (usually) | No |
| Covers cancer, heart attack, stroke | If they stop you working | Yes — directly | Only if they cause death |
| Typical monthly cost (age 30) | £17–£25 | £15–£35 | £8–£15 |
| Best fit | Self-employed, no sick pay | Pay off mortgage if seriously ill | Family with dependants |
If you can only afford one and you’re working-age with dependants, income protection is usually the most useful: most people are far more likely to be off work for months than to die in their thirties or forties.
What changes the price most?
- Age. The single biggest factor — premiums rise sharply through your 40s.
- Smoker status. Smokers pay 50–100% more.
- Occupation class. Office workers (Class 1) pay the least; manual trades (Class 4) pay the most.
- Deferred period. Picking a 26-week wait instead of 4 weeks can cut the premium by 40–50%. If you have employer sick pay, match the deferred period to when it runs out.
- Cover amount. Most insurers cap benefit at 50–70% of gross income — covering more isn’t usually possible.
- Indexation. Linking benefit to inflation increases the premium but protects against decades of price rises.
Self-employed: why income protection is non-negotiable
If you’re self-employed, you don’t get Statutory Sick Pay at all. There’s no employer to fall back on, no sick-pay scheme, no occupational pension if illness forces an early retirement. Universal Credit is means-tested and assumes savings of £6,000+ start to reduce your entitlement.
For sole traders and contractors, income protection is the single most important insurance product after household and (if you have dependents) life cover. Pick a deferred period that matches how many months of expenses you can cover from savings — typically 4, 8 or 13 weeks for the self-employed.
How to choose a policy
- Pick “own occupation” cover. The policy pays out if you can’t do your specific job, not just any job — this is the most generous definition and worth paying a small premium for.
- Choose guaranteed premiums, not reviewable. Reviewable policies are cheaper at the start but the insurer can hike the price every five years.
- Match the deferred period to your sick pay. Employed and entitled to 6 months full sick pay? A 26-week deferred period gives a much cheaper policy.
- Index-link the benefit if you can afford it — without it, your replacement income shrinks every year in real terms.
- Get advice if it’s complex. Free comparison sites work fine for simple cases; an FCA-regulated protection adviser is worth using if you have pre-existing health conditions, are self-employed in a high-risk trade, or want to combine cover types.
Frequently asked questions
Is income protection worth it?
If your household couldn’t survive on £534/month (the new SSP rate from April 2026) for a year or more, yes. Roughly one in four UK workers will be off sick for at least a month at some point in their working life — the financial hit usually dwarfs the cumulative premium cost.
Can I claim for stress, depression or back pain?
Yes. Mental health and musculoskeletal conditions are the two most common reasons for income protection claims in the UK. Critical illness cover usually does not include them.
Will my employer’s sick pay affect my claim?
It can. Most insurers want your sick pay and the policy combined to stay under 65–70% of pre-tax income, so always disclose what your employer pays and choose a deferred period that lines up with the end of full pay.
Are payouts taxed?
No. Personal income protection benefits are paid free of income tax. (Group/employer-paid policies are different — those payouts are taxable.)
Can I get cover with a pre-existing condition?
Often yes, but the insurer may exclude the specific condition or apply a higher premium. Specialist underwriters (LV=, Aviva, Cirencester Friendly, Vitality) have more flexible underwriting than mainstream brands.
What’s the difference between PHI and ASU?
PHI is income protection (long-term, illness or injury). ASU stands for Accident, Sickness and Unemployment — short-term cover (typically 12–24 months) that often also pays out if you’re made redundant. ASU is cheaper but a much weaker product, and unemployment cover is often excluded after the first months.
The bottom line
For employed parents and the self-employed, income protection is the most important “what-if” insurance you can buy after household cover. Lock in long-term cover with guaranteed premiums while you’re young, match the deferred period to your sick pay, and use “own occupation” cover. For most people the right answer is a £20-ish monthly premium for the rest of your working life — or 1% of household income.
Karl Johnson is the editor of GetSmartSaver.Uk. Premium figures are illustrative averages based on Drewberry Insurance and ABI data, May 2026. Income protection is regulated by the FCA. This article is information, not personalised advice — get tailored cover from an FCA-regulated adviser.