What is Income Protection?

Income Protection provides a replacement regular income if you are unable to work due to long-term illness or injury. It pays up to 80% of your pre-illness income. It normally begins to pay out after 6 months off work, and continues to do so until you are either able to return to work, or until you retire.

Why do people need Income Protection?

You are 3 times more likely to go on long-term sick leave than you are to die during your working life. Yet despite this dramatic statistic, while lots of us have Life insurance to protect our dependents financially if we die, only 1 in 10 of us has Income Protection. This is a great back-up plan because it protects the one thing that pays for everything else in your life: your income. It will also ensure that regular pensions contributions can still be made during the period you are off work, providing greater financial security in retirement.

I have previously been on long term sick leave from work. Is there any form of Income Protection that would still cover me?

The best way would be to get Income Protection through your employer. This is called Group Income Protection and is usually paid for entirely by your company. Group Income Protection normally means that everyone at the business is covered regardless of any previous illnesses they may have (as long as they are actively at work when the insurance policy is set up). It may be worth asking your employer if they have this kind of insurance or if they are considering setting up a Group Income Protection policy in the near future.

If you’re not covered at work, you might want to take out a policy yourself – this is called Individual Income Protection.  When you set this up, the insurer will ask you questions about your medical history to help them decide whether to give you insurance and at what cost. They may decide to ignore your previous poor health, depending on how long ago you were off sick, how many times you had the illness and how it affected your ability to work. For more information on your options you may want to contact your local Independent Financial Adviser. You can find the contact details of IFAs via: www.unbiased.co.uk

How many people have Income Protection?

Around 1 in 10 private sector UK workers have insurance to protect their income if they fall ill.  According to figures from the ABI 9.4% of UK workers (3.6 million) are protected.

Why doesn’t the Government offer Income Protection?

With an unprecedented budget deficit to tackle, the Government is cutting back on public spending, including welfare support. While the Government steps back, employers and employees are being asked to step forward to take on more responsibility in times of illness and injury. Today, the State benefit for long-term sickness is Employment and Support Allowance. For most, this amounts to around £5,200 per year.

Who pays for Income Protection?

Like pension schemes, Income Protection policies can be paid for entirely by the employer, entirely by the employee, or have the cost shared between them. Income Protection can provide flexible, affordable solutions to an entire workforce. For more information please take a look at www.unum.co.uk.

Would I be eligible for Income Protection if I had a pre-existing condition?

The best way would be to get income protection through your employer. This is called Group Income Protection and is usually fully funded by the employer. Schemes normally provide a level of cover below which everyone is covered regardless of any pre-existing conditions they may have – subject to them being actively at work when the scheme is set up. It may be worth asking your employer if they are considering setting up a Group Income Protection policy in the near future.

If you want to take out your own policy, you will need to provide information on your medical history which the insurer may take into consideration when deciding whether to provide cover or not, and if so, at what cost. They may decide to disregard your pre-existing condition depending on how long ago you were diagnosed, how many times you subsequently suffered from depression and what effect it had on your ability to work. For more information on your options you may want to contact your local Independent Financial Adviser.

What’s the difference between Income Protection and life insurance?

There are two basic differences: First, what it pays out for: Income Protection pays you money if you get a long-term illness or injury. Life Insurance pays only if you die. Clearly, with Life Insurance it will be your family who would be paid, rather than you. Second, how and when it pays: Life Insurance pays a one-off, pre-defined lump-sum of money. Income Protection makes a continuing series of regular payments, giving a pre-agreed proportion of the income you had before getting ill or injured.

Typically this pays each month, and continues for as long as your illness or injury means you can’t work, or until you’ve reached retirement age. If we look at the risks we actually face in the UK, workers here are 3 times more likely to suffer an illness or injury that makes them unable to work for more than a year, than they are to die during their working life. Yet many families who take care to have Life Insurance against the less likely event, don’t have a back-up plan in place for the much more likely possibility of extended illness or injury. In fact, around 5-6 out of 10 of us have Life Insurance, while only 1 in 10 have Income Protection.

Funnily enough, more people insure their pets and their mobile phones than insure the one thing that pays for both – their income! In many cases, the best way to get Income Protection is through your employer as part of your benefits package, so you might want to speak to your boss about getting covered.

Who can I speak to about Income Protection?

This website aims to cover questions about Income Protection – for employees and employers. We regularly have guest experts on the site to answer your questions and you can email us with your queries too. There are also resources and downloads for employees and employers on the site. However, if you’d rather chat to someone about Income Protection, you can call our customer services centre on: 0800 085 0518

What is Group Income Protection?

Group Income Protection provides a replacement income if an employee is unable to work as a result of a long-term illness or injury. It can pay up to 80% of the claimant’s pre-illness income. It normally begins to pay-out after 6 months off work, and continues to do so until they are either able to return to work or retire. The policy is bought through the employer, who selects it on behalf of a group of employees.

Why do employers need Group Income Protection?

Having a back-up plan is essential for employers. It allows them to plan and protect themselves against the unexpected loss of members of staff due to illness or injury. This absence has significant direct and indirect costs that are mitigated through Income Protection. It also provides the support to ensure effective rehabilitation is available, helping employees get back to work more quickly.

Therefore, it’s important that employees’ have a back-up plan in case they’re unable to earn due to illness or injury. Companies that provide Group Income Protection are demonstrating that they care for the wellbeing of their staff, by helping them protect their lifestyles in good times and bad.

I am self employed, what’s the best way for me to get Income Protection?

If you’re self employed, there are some options to explore to protect your income if you are injured or get ill and unable to work long term – including Income Protection. We recommend you contact a few local IFAs to compare bespoke quotes for your personal situation. You can discuss the kind of cover that best suits you with an Independent Financial Advisor. You can find the contact details of IFAs that suit your needs via: www.unbiased.co.uk

Why does Income Protection matter to the economy?

Long term sickness absence cost the economy £3.7bn in 2009 (CBI). Over 2,000,000 workers currently employed in the UK have had to take 6 months or more off work during their careers. UK workers could survive for an average of just 52 days on their savings.

Why should Income Protection form part of an employee’s benefits package?

Income Protection forms a key component of a well-balanced employee benefits package. It benefits both employers – by helping manage costs of absence – and employees by providing crucial financial support if they’re unable to earn an income due to illness or injury.

People take out all sort of insurance, but the one they really need is Income Protection as it protects the one thing that pays for everything else. Getting this insurance through the workplace is the easiest, quickest and most affordable way.

What are the benefits for employers offering Income Protection?

Employers who offer Income Protection are able to manage risks of unplanned, additional staff costs due to sickness absence. Income Protection also can also provide rehabilitation support to help the employee get back to work faster, and reduce both direct and indirect costs of absence. Finally, Income Protection provision demonstrates to employees that an employer cares for their well-being, supporting talent management.

Comments (7)

  1. I have worked for 34 years and had never been on benefits until 2008 when I had to retire from work because I could no longer use a pen or a computer keyboard, or walk because I had been diagnosed with Multiple Sclerosis in 2000. I continued working full time after diagnosis for eight years. I do not understand why I had been paying full national insurance for 34years – I stupidly thought that NI contributions were paid as “insurance” to protect those that worked and paid in against unforeseen life changing events such as being unable to work through illness or sudden unemployment. It is now apparent that this is not the case and as well as paying NI contributions workers must now buy private health insurance because the Government plans to keep the money from NI and give sweet FA back.

    I would like to know how you could ‘help’ me back to work since I am a full time wheelchair user, I am now doubly incontinent, cannot hold a pen and today had a second-hand stairlift installed.

    • Thanks for your comment Tracy – sorry to hear about your situation.

      You’re right to highlight that the UK’s welfare system doesn’t offer the support that many working people might assume it does. We’ve found that those earning over £25K annually are at risk should they be unable to work, since State benefits will not maintain their standard of living if they stop earning due to illness or injury. This group – the Squeezed Middle – typically have families to support, education costs, mortgages and other fixed financial commitments which wouldn’t be covered by State benefits – as you seem to have experienced.

      Unum believe that for these people, who are most exposed, Income Protection is a sensible back-up plan, best put in place when all is well and they are earning an income. Regrettably, if you or your employer does not have Income Protection insurance, it is unlikely that you will find the protection you are looking for once you are off work long term. Part of the Income Protection support Unum offer is access to a rehabilitation team who can help people get back to work – whether in their previous job or in a similar role with adapted working conditions.

      If you haven’t already, it’s probably best for you to seek advice on your personal situation from your local Citizen’s Advice Bureau, check their website for details of your local office: http://www.citizensadvice.org.uk

      Best wishes,

      The AskUnum team

  2. Robert Aitken at 8:55 pm

    I work as a contractor, my company does not give me any benifits, statuary sick pay only. Can I still get covered. My company have no interest in me as a person whatsoever.

    • Thanks for your question.

      Employer schemes are generally cheaper because the chance of someone claiming is spread across all those covered and the administration is simplified.

      However, you can certainly take out your own insurance to protect yourself. We recommend you contact a few local Independent Financial Advisors to discuss the kind of cover that best suits your situation. You can find the contact details of IFAs via: http://www.unbiased.co.uk.

      Best wishes,
      The AskUnum team

  3. Garry Savage at 8:16 am

    Asn employee of a local company i was recently injured at work. i have been off work since 1st November 2011. As per one of your articles, If the company doesn’t have Group Income protection I can Go for the Individual Soluction.
    My Question is can I still apply for the Individual Income protection whilst i am currently off work and who would you highly recommend.
    Great site
    I look forward to hearing from you.

    Garry Savage

    • Hi Garry
      Thanks for your question. Glad you like the website.
      Generally, if someone is already off work due to ill health or injury, it is unlikely they will be able to take out an Income Protection policy. Likewise, if they have previously suffered a long-term illness, are now back at work and take out an individual policy, it is likely to exclude their former injury or illness, as a pre-existing condition.
      Although it’s not something your employer currently has, you could ask if they are considering setting up a Group Income Protection policy in the near future. To do that, you could speak to your HR department or the person who deals with other benefits, like your pension. There’s a guide to speaking about Income Protection with your employer here:
      http://blog.unum.co.uk/downloads/employees/talking-about-income-protection-at-work.
      With group policies, there is no need to worry about the pre-existing medical conditions as the cover is one size fits all for all staff in a company as long as they are actively at work when the scheme starts.
      However, if you wanted to take out your own policy, all insurers take slightly different approaches to how they consider an individual’s medical history. Although Unum is authorised and regulated by the FSA but we do not give financial advice. But a financial adviser would be able to contact providers on your behalf to discuss your situation and if it is possible to get cover for you. If you don’t already have one, you can find details of IFA’s via: http://www.unbiased.co.uk.
      We wish you all the best with your recovery.
      The AskUnum team

  4. Graham at 11:26 pm

    My self and partner work for a company that used UNUM for income protection for all its staff. You really don’t tend to think about it until you need it though. In 2009 my partner was left with a metabolic brain injury and several other problems after being in a coma. Since company sick pay had ran out, income support from UNUM proved invaluable. My partner does receive DLA as well and, with the UNUM payments through work, can at least maintain a comfortable lifestyle without added stress of worrying about money for the time being. My only concern is what will happen if its decided my partner will not be able to return to work but, in the mean time, I am very grateful for the support she has had from both UNUM and her employer and can’t thank either enough.

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