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9 Dec 2023
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Legal & General

Income Protection Insurance Explained

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Income Protection

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Income Protection

Income protection insurance or permanent health insurance aims to give you an income if you can't work in the event of sickness or illness. The amount of cover can be anything up to three-quarters of your normal wage, less any state benefits you receive.

For the self-employed, insurers usually base the level of cover on your taxable income at the point of a claim. All pay-outs for income protection insurance are tax free and usually continue until you recover or you reach your selected pension age/term of the policy.

Income protection insurance will not cover redundancy, for details on redundancy insurance please read our accident sickness and unemployment cover section.

Income Protection Insurance Pros and Cons


  • It will provide a tax free monthly income if you cannot work due to accident or sickness
  • Will be beneficial if you or your family relies on your wage to pay most of the bills and if you want the security of continuing pay outs.
  • May be useful if you are self-employed or don’t have a job with sick pay.
  • It's up to you how you spend the money each month.


  • This is one of the more expensive forms of this type of insurance if you have a short deferment period.
  • This cover does not typically include redundancy cover, and a separate policy would be required for this cover.

What is Income Protection Insurance?

Income protection, also known as permanent health insurance or income replacement, provides a tax free income if the policy holder becomes unable to work through illness. An income is typically paid until retirement age, the end of the policy term or until the policy holder is able to return to work. Permanent health insurance does not normally cover unemployment or redundancy.

Most income protection policies will pay a monthly tax-free payment equivalent to between 50% and 65% of gross salary, although some companies will offer up to 75%. There is a period following the accident or illness which must elapse before the policy begins to pay.

This can range from a month up to two years and is known as the deferment period. Deferment periods offered vary between providers, currently the options are 4 weeks, 8 weeks, 13 weeks 26 weeks, 52 weeks and 104 weeks. Our advisors will also have access to plans with no deferment period known as back to day one income protection insurance.

Premiums are dependent on the monthly income required, age, current state of health smoker status and occupation. The deferment period also affects the premium, with a shorter period resulting in higher premiums being required.

Many company pension schemes include some form of permanent health insurance as part of their benefits package. You should check you benefits package before applying for an income protection plan as these can affect your maximum benefits allowed. If you are unsure please speak to an advisor.

If you are looking for life insurance its worth noting that income protection insurance can be taken with some providers as part of a life insurance multi plan. The benefit of this is the potential to save on policy fees as some insurance companies will offer a multi plan discount.

Different types of Income Protection Insurance are available:

Long Term Cover

  • pays a tax free monthly income on the event of you not being able to work due to accident or sickness. The monthly benefit is payable until you return to work or until the end of the policy term..

Short Term Life Insurance

  • pays a tax free monthly income on the event of you not being able to work due to accident or sickness. This type of income protection insurance pays for a maximum 2 years claim period for further details please read our section on low cost income protection for further details

Mortgage Payment Protection

  • pays an amount of monthly cover based on your mortgage payment if you lose your job or can't work, you get that amount of money each month. Policies usually pay out for up to a year or until you return to work. please read our section on mortgage protection.

Accident Sickness or Redundancy

  • pays an amount of monthly cover bused on your income if you lose your job or can't work, you get that amount of money each month to spend how you like. Policies usually pay out for up to a year or until you return to work. please read our section on accident sickness and redundancy

Additional options and areas for consideration include:

Some providers of income protection cover offer benefits such as

  • Increasing benefit
  • Parent and child cover.
  • Rehab support services, Fracture cover.
  • Life Insurance Death benefit.
  • Unemployment payment holiday.
  • Benefit guarantee of £1500 pm
  • Guaranteed Increase Options – Including one for those clients that rent

Income Protection Insurance Plans are Available on

Single Life

  • Pays an Income to one person on a claim

Joint life

  • Income Protection cover can only be taken out as an single life plan as the policy is underwritten on your personal heath and occupation

Discounted Income Protection Insurance Quotes

Our income protection insurance quote tool allows you to compare the leading insurance companies income protection premiums. What's more Go Direct guarantee that at the time of application you will not get cheaper like for like cover as we rebate 50% of the initial commission the provider pays us back into your income protection insurance policy.

Information regards taxation levels and basis of relief's are dependent on current legislation, individual circumstances are not guaranteed and may be subject to change.

Do you want advice on Income Protection Insurance ?

After looking through the income protection insurance information if you would like income protection insurance advice, complete our life insurance inquiry form and we will contact you to discuses your income protection insurance or accident and sickness needs.

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Go Financial Services is a trading style of Go Direct UK Ltd which is an appointed representative of Personal Touch Financial Services Ltd which is authorised and regulated by the Financial Conduct Authority. Registered in England & Wales Company 5703224. FCA Number 456600