Is income protection worth it if my employer pays sick pay?

It depends on how long and how much your employer pays. Many schemes pay full salary for a few weeks or months, then drop to half pay or Statutory Sick Pay, which is £123.25 a week for up to 28 weeks. A long illness can outlast employer sick pay by a wide margin. Some people choose a deferred period that starts when their employer sick pay ends, so the policy fills the gap without paying for cover they do not need. Check your contract or staff handbook for the exact rules, and ask HR whether there is any group income protection, because that changes the picture significantly.

Is income protection worth it for the self-employed?

It is often more relevant, because the self-employed receive no Statutory Sick Pay and no employer sick pay. If illness stopped you working, your income could stop almost immediately while business and household costs continue. State support such as Universal Credit is means-tested, so savings and a partner’s income can reduce or remove it. Income protection can replace part of your earnings after a deferred period you choose. Insurers usually assess self-employed income from accounts or tax returns, so it helps to have recent figures ready. Choosing the deferred period carefully — balanced against your savings — is the main lever on price.

Is income protection taxable?

Benefits from an individual income protection policy that you pay for yourself are generally free of income tax. That exemption comes from section 735 of the Income Tax (Trading and Other Income) Act 2005, which covers health and employment insurance payments. The position is different for group income protection funded by an employer, where benefits are usually paid through payroll and taxed as earnings. Executive income protection, where a company pays the premium for a director, is also usually paid through payroll. Tax rules can change and depend on individual circumstances, so check your own situation or ask a qualified tax adviser if you are unsure.

Why are income protection claims declined?

The most common reasons are that the claimant did not meet the policy’s definition of incapacity, that the deferred period had not been completed, that an exclusion applied, or that the insurer believed the application did not give accurate information. Ombudsman decisions show disputes over “own occupation” definitions and over exclusions and deferred periods. If a claim is declined, ask the insurer for a written explanation, complain formally if you disagree, and then take the complaint to the Financial Ombudsman Service, which is free. Answering application questions carefully and keeping records of your medical evidence help protect a claim.

Is short-term income protection worth it?

Short-term income protection limits each claim to a set period, often one, two or five years, rather than paying until retirement. It costs less than long-term cover, which can make it easier to afford, and it covers many illnesses and injuries that last months rather than years. The trade-off is that it would stop paying during a long-term illness, which is exactly when the financial impact is largest. Some people choose short-term cover as a starting point and review it as their income grows. Our guide to short-term and long-term income protection sets out the differences so you can weigh cost against the length of protection.

How does income protection work with state benefits?

It can affect means-tested benefits. Universal Credit takes account of household income and savings, so income protection payments may reduce what you receive. New Style Employment and Support Allowance depends on your National Insurance contributions rather than savings, but other rules can apply. Some insurers also reduce the policy benefit if you receive other income while claiming; this is set out in the policy wording. Because the interaction depends on your circumstances, check the latest GOV.UK rules and your policy terms, and use an official benefits calculator if you think you might claim state support alongside an income protection policy.

Income protection

Is income protection worth it?

The short answer

Income protection is worth it if losing your earnings for months would put your home or family at risk and sick pay, savings or employer cover would not bridge the gap. Statutory Sick Pay is £123.25 a week for up to 28 weeks. It is worth less with generous sick pay or group cover.

Written by Emma Leadbetter. Reviewed by Andrew Buscu.

Published 1 October 2026. Last reviewed 1 October 2026. Next review due 1 April 2027.

Statutory Sick Pay, per week: £123.25 ^[1]
SSP maximum length: 28 weeks ^[1]
Protection claims paid in 2025: £7.84bn ^[4]
Individual policy benefits: Tax-free ^[10]

Is income protection worth it? The essentials

It is worth most when your household could not cope on sick pay and savings alone. Read more
It replaces part of your earnings monthly, for any illness or injury that stops you working. Read more
State support is modest: Statutory Sick Pay is £123.25 a week for up to 28 weeks. Read more
The deferred period, definition of incapacity and benefit period decide much of its value. Read more
Declined claims usually turn on definitions, deferred periods or application answers. Read more

Whether income protection is worth it

Income protection is worth it if losing your earnings for months or years would put your home, bills or family at risk, and you do not already have enough sick pay, savings or employer cover to bridge the gap. It is worth less if you have generous long-term sick pay, substantial savings, group income protection at work, or no one relying on your income.

This guide sets out what the cover does, the gap it fills, when it tends to be worth more or less, and the choices that change its value. It is information, not advice. For a personal recommendation, speak to an FCA-authorised adviser.

What income protection actually does

Income protection pays a regular monthly income if illness or injury stops you working, after a waiting time called the deferred period. Payments continue until you return to work, the benefit period ends, or the policy term ends — whichever comes first. Individual policies usually cover a percentage of your earnings rather than all of them.

Unlike critical illness cover, it does not depend on a list of conditions. What matters is whether you meet the policy’s definition of being unable to work. Benefits from an individual policy you pay for yourself are generally free of income tax under section 735 of the Income Tax (Trading and Other Income) Act 2005. ^[10]

See what income protection is and how it works for the full mechanics.

The gap it fills: sick pay and state support

If you are an employee, the legal minimum your employer must pay when you are off sick is Statutory Sick Pay: £123.25 a week, or 80% of your normal weekly earnings if lower, for up to 28 weeks. ^[1] Many employers pay more under their own sick pay schemes, but often only for a set period. After that, you may be able to claim Employment and Support Allowance ^[2] or Universal Credit, ^[3] depending on your circumstances, contributions, savings and household income.

What each source of income pays when you are too ill to work
Source	What it pays	How long	Points to note
Statutory Sick Pay	£123.25 a week, or 80% of weekly earnings if lower	Up to 28 weeks	Employees only
Employer sick pay	Set by your contract	Set by your contract	Often full pay for a period, then reduces
Employment and Support Allowance	Depends on assessment	Depends on eligibility	New Style ESA depends on National Insurance contributions
Universal Credit	Depends on household income and savings	While eligible	Means-tested, so savings and a partner’s income count
Individual income protection	A set monthly benefit, usually a share of earnings	Until return to work, or end of benefit period or term	Starts after the deferred period you choose

When income protection tends to be worth more

You are self-employed or a contractor with no sick pay at all.
Your employer pays only Statutory Sick Pay, or full pay for just a few weeks.
You have a mortgage or rent, and a partner or children relying on your income.
Your savings would cover only a few months of essential outgoings.
Your work depends on a specific skill or physical ability that an illness could interrupt.

Our guide to income protection for the self-employed covers proving fluctuating income and choosing a short deferred period.

When it may be worth less

Your employer provides group income protection that would pay a share of your salary long-term.
Your contract gives generous sick pay for a long period.
You have enough savings or other income to cover years, not months, of essential outgoings.
The premium would be hard to sustain, risking the cover lapsing when you need it.

If your employer provides group cover, find out how long it pays, how much, and whether it ends when you leave. Group cover usually stops with the job.

Does income protection pay out?

The Association of British Insurers reported £7.84 billion paid across life, critical illness and income protection claims in 2025, ^[4] and £8 billion in 2024. ^[5]

Individual claims can still be declined. Ombudsman decisions show the recurring reasons. In one, the dispute turned on the policy’s “own occupation” definition of incapacity; ^[6] in another, on an exclusion and whether the deferred period had been met. ^[7] Under the Consumer Insurance (Disclosure and Representations) Act 2012, an insurer’s remedies for an inaccurate application depend on whether you took reasonable care. ^[8] The Ombudsman’s yearly complaints data shows how often it upholds complaints across insurance products. ^[9]

See do income protection policies pay out? for more detail.

Choices that change what a policy is worth

Policy choices and how they change value
Choice	Options	Effect on value and price
Deferred period	Often 4, 8, 13, 26 or 52 weeks	Longer waits cost less but leave you relying on sick pay or savings longer
Definition of incapacity	Own occupation, suited occupation, or activities-based	Own occupation is generally the broadest, and usually costs more
Benefit period	Limited (e.g. 1, 2 or 5 years per claim) or to the end of the term	Longer benefit periods protect against long-term illness
Premium type	Guaranteed or reviewable	Reviewable can start lower but rise
Benefit amount	A share of earnings, capped by the insurer	Should cover essential outgoings after other income

Matching the deferred period to when your sick pay ends is one of the most effective ways to keep the cost down without leaving a gap. See deferred periods explained.

Making the premium affordable

A policy is only worth having if you can keep it. If a quote looks too expensive, there are several ways to bring the cost down while keeping meaningful protection, each with a trade-off you should understand before choosing it.

Lengthen the deferred period so that it starts when your employer sick pay ends, rather than earlier.
Reduce the monthly benefit so it covers essential outgoings rather than your full take-home pay.
Choose a limited benefit period, such as two or five years per claim, instead of cover to retirement age.
Set the policy to end at the age you expect to stop relying on earned income.

Each of these reduces what the policy would pay in some circumstances, so the right combination depends on your savings, your employer’s sick pay and how long you think you could manage without income. It is usually better to hold a modest policy you can keep than a generous one you might cancel when money is tight, because restarting cover later means fresh underwriting based on your health at that time.

If your circumstances change — a pay rise, a new mortgage, a move to self-employment — review the benefit and deferred period so the policy keeps pace with what you need.

It can also help to ask the insurer, or an adviser, to show quotes side by side for two or three different deferred periods and benefit levels. Seeing how much each change saves, and what protection you would give up in return, usually makes the decision far clearer than looking at a single price on its own.

Questions to decide if it is worth it for you

What would your employer pay, and for how long? Check your contract or staff handbook.
What are your essential monthly outgoings?
How many months could savings cover those outgoings after sick pay ends?
Does anyone depend on your income?
Could you keep paying the premium for the whole term?

If the gap is large and long, income protection may be valuable. If you are already well covered, it may add less. How much income protection you need walks through the sums.

Common questions

Is income protection worth it if my employer pays sick pay?: It depends on how long and how much your employer pays. Many schemes pay full salary for a few weeks or months, then drop to half pay or Statutory Sick Pay, which is £123.25 a week for up to 28 weeks. ^[1] A long illness can outlast employer sick pay by a wide margin. Some people choose a deferred period that starts when their employer sick pay ends, so the policy fills the gap without paying for cover they do not need. Check your contract or staff handbook for the exact rules, and ask HR whether there is any group income protection, because that changes the picture significantly.
Is income protection worth it for the self-employed?: It is often more relevant, because the self-employed receive no Statutory Sick Pay and no employer sick pay. If illness stopped you working, your income could stop almost immediately while business and household costs continue. State support such as Universal Credit is means-tested, so savings and a partner’s income can reduce or remove it. ^[3] Income protection can replace part of your earnings after a deferred period you choose. Insurers usually assess self-employed income from accounts or tax returns, so it helps to have recent figures ready. Choosing the deferred period carefully — balanced against your savings — is the main lever on price.
Is income protection taxable?: Benefits from an individual income protection policy that you pay for yourself are generally free of income tax. That exemption comes from section 735 of the Income Tax (Trading and Other Income) Act 2005, which covers health and employment insurance payments. ^[10] The position is different for group income protection funded by an employer, where benefits are usually paid through payroll and taxed as earnings. Executive income protection, where a company pays the premium for a director, is also usually paid through payroll. Tax rules can change and depend on individual circumstances, so check your own situation or ask a qualified tax adviser if you are unsure.
Why are income protection claims declined?: The most common reasons are that the claimant did not meet the policy’s definition of incapacity, that the deferred period had not been completed, that an exclusion applied, or that the insurer believed the application did not give accurate information. Ombudsman decisions show disputes over “own occupation” definitions ^[6] and over exclusions and deferred periods. ^[7] If a claim is declined, ask the insurer for a written explanation, complain formally if you disagree, and then take the complaint to the Financial Ombudsman Service, which is free. Answering application questions carefully and keeping records of your medical evidence help protect a claim.
Is short-term income protection worth it?: Short-term income protection limits each claim to a set period, often one, two or five years, rather than paying until retirement. It costs less than long-term cover, which can make it easier to afford, and it covers many illnesses and injuries that last months rather than years. The trade-off is that it would stop paying during a long-term illness, which is exactly when the financial impact is largest. Some people choose short-term cover as a starting point and review it as their income grows. Our guide to short-term and long-term income protection sets out the differences so you can weigh cost against the length of protection.
How does income protection work with state benefits?: It can affect means-tested benefits. Universal Credit takes account of household income and savings, so income protection payments may reduce what you receive. ^[3] New Style Employment and Support Allowance depends on your National Insurance contributions rather than savings, but other rules can apply. ^[2] Some insurers also reduce the policy benefit if you receive other income while claiming; this is set out in the policy wording. Because the interaction depends on your circumstances, check the latest GOV.UK rules and your policy terms, and use an official benefits calculator if you think you might claim state support alongside an income protection policy.

Sources

GOV.UK. Statutory Sick Pay (SSP). Accessed 1 October 2026 (primary source)
GOV.UK. Employment and Support Allowance. Accessed 1 October 2026 (primary source)
GOV.UK. Universal Credit. Accessed 1 October 2026 (primary source)
Association of British Insurers. Protection insurers pay out £7.84 billion to help customers safeguard their finances. 29 June 2026 (primary source)
Association of British Insurers and GRiD (reported by Cover Magazine). Insurers paid £8bn in protection claims in 2024. Accessed 15 September 2026 (primary source)
Financial Ombudsman Service. Final decision DRN-5719011 (income protection claim — own occupation definition). Accessed 15 September 2026 (primary source)
Financial Ombudsman Service. Final decision DRN-4775950 (income protection claim — exclusion and deferred period). Accessed 15 September 2026 (primary source)
UK Parliament (legislation.gov.uk). Consumer Insurance (Disclosure and Representations) Act 2012. Enacted 8 March 2012 (primary source)
Financial Ombudsman Service. Annual complaints data and insight 2024/25. 2 July 2025 (primary source)
UK Parliament (legislation.gov.uk). Income Tax (Trading and Other Income) Act 2005, section 735: health and employment insurance payments. Enacted 24 March 2005 (primary source)