How to Compare Income Protection Policies

Key things to know

1. Benefits are capped, often at 50% to 70% of earnings, but payouts are tax-free, so the money goes further than the same gross pay would.
2. A longer deferred period, the wait before benefits start, lowers the premium, so match it to your sick pay and savings.
3. Short-term policies pay for one to five years; long-term policies can pay until you return to work or retire.
4. Own occupation cover pays when you cannot do your own job, while suited occupation cover applies when you cannot work in your field or a similar field.
5. Guaranteed premiums stay the same, while reviewable premiums can rise, so check which type you are buying.

Income protection pays a monthly benefit if illness or injury stops you working, and it is often sold under other names such as sickness insurance or accident and sickness cover. Policies differ far more than most price comparison results suggest: the benefit level, the wait before payment, the length of payment and the definitions in the small print all vary. This walkthrough takes you through the comparison in order, so you can see what each policy would actually do for you before you commit to the premium.

Step 1: Work Out What You Need the Policy to Replace

Start with your own situation rather than the quotes. Income protection is not for everyone, because sick pay may already form part of your workplace benefits or pension scheme. Ask yourself:

• How long does your employer pay full pay, then half pay, then nothing?
• Do you have savings that could cover the gap after sick pay runs out?
• If you work for yourself, no employee health benefits exist to fall back on, so the policy may need to carry more of the load.
• Which bills must be paid every month no matter what: mortgage or rent, council tax, utilities, food and travel?

Write down the date your income would actually stop. That date drives several of the choices below, and getting it wrong at this stage is one of the most common mistakes buyers make.

Step 2: Check How Much of Your Income the Policy Would Pay

Insurers cap the benefit as a percentage of your earnings, and that ceiling usually lands somewhere between 50% and 70% of your salary, though the exact figure varies between policies. That may sound low, but payments from these policies are tax-free, so the money usually stretches further than the same gross salary would.

Check how each quote defines your income. Some policies base the benefit on salary alone, while others may account for different earnings arrangements, so the same headline percentage can produce different monthly amounts. Compare the pounds per month each quote would pay, not the percentage on the front page.

Step 3: Compare Deferral Periods Against Your Savings

The deferred period is how long you wait after stopping work before benefits start. You choose it when you apply, and the two biggest levers on the price are the monthly benefit you ask for and the deferred period you pick. Requesting a smaller payment, or agreeing to a longer wait, will each bring the cost down.

The deferred period often works best when it matches other support you already have. If your employer pays full sick pay for six months, a policy that starts paying after that point avoids paying a premium for cover you do not need. What other benefits you can claim, and for how long, can determine the deferred period that suits you.

Worth doing: Set your deferred period to the date your sick pay and savings would run out together, then check that any quote you receive starts paying from there.

Step 4: Look at How Long Benefits Are Paid

Two policies with identical monthly benefits can behave completely differently once a claim starts, because the payment period differs. Short-term policies pay benefits for a limited period, typically between one and five years. Long-term policies keep paying for as long as ill health keeps you out of work, up to retirement or the end of the policy.

Some budget-type policies are tied to specific bills and pay for shorter periods. These are the common variants:

Policy type	What it covers	Typical payment period
Long-term income protection	Illness or injury preventing work	Until you return to work, retire or the policy ends
Short-term income protection	Illness or injury preventing work	Usually one to five years
Accident, sickness and unemployment (ASU)	Sickness, injury or redundancy	Often around 12 months
Mortgage payment protection (MPPI)	Monthly mortgage payments	Six months to two years

Payment protection insurance, which covers a single debt such as a loan or credit card, typically runs for 12 to 18 months. A short payment period is not a flaw in itself, but it needs to match the risk you are covering. A policy that stops paying after a year is a poor fit if your main worry is a long absence from work. If you do end up claiming, our guide to making an insurance claim step by step sets out what to expect.

Step 5: Read the Definitions of Sickness and Occupation

This is the part of the policy that decides whether a claim succeeds, and it is the part buyers skip. Policies differ on when they consider you unable to work:

• Own occupation cover pays out when you cannot do your own job, rather than only when you cannot work in any position.
• Suited occupation cover pays if you cannot work in your field, or in a field close to it.

The wording you get affects when a claim would be considered valid, and it is set out in the policy documents rather than the quote summary. Read each definition with your own role in mind, and check which one each quote uses before comparing prices, since a cheaper policy with different wording is not a like-for-like saving. Do not assume a policy offers own occupation cover unless the documents say so.

Step 6: List the Exclusions and Pre-Existing Condition Rules

Insurers price the risk you describe to them, so the application will ask about your health, your job and your circumstances. Policies vary in how they treat existing conditions, and some conditions may be excluded from cover altogether, so read the exclusions section of each quote and note anything that affects you. If you work for yourself, answer the questions about your employment status fully and accurately, because a wrong answer here can surface at claim time.

Also check the claim mechanics while you are in the documents. Unlike some insurance, income protection carries no one-claim limit: provided the policy is still running, you can claim again each time a new illness or injury stops you working. Where a claim is disputed, our article on challenging a rejected insurance claim explains the options. If you are gathering quotes through aggregator sites, our guide to using comparison sites without the pitfalls helps you spot what those results leave out.

Step 7: Compare Premium Types Before You Sign

The last check is how the premium behaves over time:

• Guaranteed premiums do not change for the term of the policy, so the amount you pay is fixed.
• Reviewable premiums may change over time, as the insurer reviews them at set intervals and can raise them in line with its claims record.

A reviewable premium can look cheaper on day one and cost more later, so compare quotes on the same basis before deciding. Permanent health insurance, the older name for this type of cover, was originally sold with the price fixed for the whole run up to retirement, whatever the claims record, which shows how much premium type can matter over a long policy.

Write down your sick pay end date, your essential monthly outgoings and the date your savings would run out, then use those three figures to compare each quote’s benefit level, deferred period and payment period side by side.

Questions answered

How much of my salary can income protection replace?
Policies set a ceiling on the benefit, and it usually falls between 50% and 70% of your earnings. Payouts are tax-free, so most people find the amount workable.

What is a deferred period?
It is the length of time you wait after stopping work before benefits begin. Choosing a longer deferred period makes the policy cheaper, and it can be set to match how long your employer pays sick pay.

Can I claim income protection more than once?
There is no single-claim limit. Provided the policy is still running, you can make a fresh claim each time a new illness or injury stops you working.

Do income protection premiums stay the same?
Only if you buy a guaranteed premium policy. Reviewable premiums can change over time, so compare the two types before you commit.