Do You Need Income Protection Insurance?

Every year, so many people in the UK are unable to work due to illness or injury. This can place a strain on your financial situation and leave you worried about meeting your financial commitments, such as your mortgage and other household bills. Did you know that Income Protection insurance could protect you from such circumstances?

At Caspian Insurance, we have the extensive industry knowledge to help you find the most suitable policy to suit your needs. Our latest guide can help you understand a little more about how Income Protection insurance works and if it would benefit you. 

What is Income Protection Insurance?

Income Protection insurance provides a monthly tax-free amount, which can be used to help you meet your financial commitments if you had to take an extended break from work caused by an accident or illness.

In the event that you need to make a claim on your Income Protection policy, you will receive a percentage of your salary each month. The amount you will receive may be dependent on your salaried income at the time of your claim.

How does Income Protection insurance work?

Income Protection insurance essentially replaces part of your income while you are unable to work due to illness or injury. It usually pays out until you are deemed to be able enough to return to work or your policy ends. In some cases, there can be a waiting period before your pay-out starts, this is often referred to as a “deferred period”. This can be helpful if you already receive sick pay, as you can set payments to start once any sick pay is scheduled to end.

You are able to claim as many times as you need to, while the policy is still active. It is important to note there is no cash value at any point. You will likely be required to fill in a claim’s form, with evidence of why you are off work. This can include a medical report from your GP. 

Short-term vs long-term

There are two types of Income Protection; short-term and long-term. Short-term Income Protection insurance, as it suggests, is designed to pay out for a short period. This is usually 1-2 years and is beneficial to help you get back on your feet and return to work. Usually, you will have to return to work for a set period of time before you are able to make a further claim on the policy.  

Long-term Income Protection insurance can provide financial help if you unable to work, due to accident or sickness, for a longer period of time. This means that in the event of a successful claim, you will be able to claim on the policy up until it expires or you return to work. Long-term policies usually require you to set up the policy to protect you over a minimum term of 5 years, but check with your provider.

What does Income Protection insurance cover?

Income Protection insurance protects you should you be unable to work due to illness or injury. Therefore, it is based on your ability to work. The following are examples of how the provider may choose to define the ability to work based on: your own occupation, any similar/suited occupation or any occupation.

Who does and does not need it?

Being unable to work due to illness or injury can make it much harder to pay the bills, whether you have children and other dependents or not. If you do not have enough savings to cover your time off work or you are not in receipt of sick pay from your employer, Income Protection could offer a financial lifeline.

There are some industries where Income Protection is more popular. If you are self-employed you may benefit from this type of cover, as you may not have sick pay to fall back on. 

By the same token, if you could get by on your sick pay or you have sufficient savings, you do not necessarily need to take out Income Protection insurance. The type of cover you need can be dependent on your circumstances. The team at Caspian Insurance can advise you on the most suitable solution.

How much does Income Protection cost?


Your circumstances can impact the type of policy you choose. For example, someone with no mortgage or dependents will not have the same insurance requirements as someone with a family and a home to pay for. You pay for your policy via monthly premiums, which are calculated off a number of different factors.


There is no one-size-fits-all policy; we help you find a tailored cover that suits your individual needs. Your monthly premiums may be impacted by your age, smoking status, lifestyle, health and occupation. 


The cost of Income Protection insurance can also be affected by how much cover you need. The amount you need may depend on your mortgage payments or monthly outgoings. The price will also be impacted by the length of the deferred period you choose, how long a claims period you select and how long a term you take the policy out for. It is important not to sign up for the cheapest policy unless it is right for you, as you may end up without sufficient cover.


To find out more about the right insurance policy for your needs, get in touch with us today.


Please note that the descriptions above do not constitute as financial advice and may change depending on individual circumstances and budgetary requirements.