The overlooked insurance that could pay if you’re signed off work

Time off work due to illness, including conditions such as stress or anxiety, can quickly affect your income, but it’s not always clear what support is available.

Income protection insurance is designed to replace part of your income if you’re unable to work due to illness or injury.

A survey of 1,500 UK adults by financial services provider Shepherds Friendly found 59% of respondents didn’t realise income protection can cover mental health conditions such as stress, anxiety or depression.

Here, Which? explains what income protection covers, how it pays out and whether it’s worth considering.

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What does income protection cover?

Income protection covers a wide range of conditions – essentially, any illness or disability that leaves you unable to work for a period of time. This might include physical conditions, such as cancer or a heart attack, or mental health conditions, including stress.

As with any claim, you will need to meet the insurer’s definition of being unable to work, which may involve medical evidence.

However, what is covered will depend on the policy. Pre-existing conditions are usually excluded, and income protection will not pay out if you are made redundant.

• Find out more: Income protection insurance – complete guide for 2026

How income protection pays out

Income protection typically pays out a regular income rather than a lump sum, usually covering around 50% to 70% of your salary.

Payments don’t start immediately. Most policies include a waiting period, known as a deferral period, which can range from a few weeks to several months after you stop working. 

Once payments begin, they will usually continue until you are able to return to work, or until the policy ends.

How your ability to work is assessed can also vary. Some policies will only pay out if you cannot do your specific job, while others may consider whether you could do a different type of work.

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Why many think they don't need it

The survey by Shepherds Friendly found 43% of workers said they don’t need insurance because they don’t earn enough, while 37% said they don’t need cover because they are healthy.

This suggests many see income protection as something they either can’t justify paying for, or won’t need.

But these assumptions can be risky. Lower earners are often the least able to absorb a loss of income, meaning even a short period off work could put pressure on savings or day-to-day finances.

While some employees may be able to rely on sick pay, this is often limited. Once it runs out, income can drop significantly, leaving many without a clear financial fallback.

• Find out more: How much is statutory sick pay?

Is income protection right for you?

Whether income protection is worth it depends on your circumstances. To work out if you might need it, consider:

1. How long could you cover your expenses without income? If you have limited savings, even a short period off work could be difficult to manage.
2. What sick pay would you receive? Some employers offer generous cover, but many only provide support for a limited time.
3. How secure is your income? If you are self-employed or don’t have access to workplace benefits, you may have less to fall back on.

If you already have strong financial support in place, such as substantial savings or long-term sick pay, income protection may be less necessary.

As with any policy, the level of cover, cost and exclusions will vary, so it is important to check what is included and whether it fits your needs.

5 ways to cut the cost of cover

If you are considering income protection, there are ways to lower the cost, depending on how much cover you need and what you can rely on financially.

1. Choose a longer waiting period before payouts start If you can afford to rely on savings or employer sick pay for a period, opting for a longer wait before payments begin can reduce premiums.
2. Opt for a shorter payout duration Choosing a policy that pays out for a set period, such as one or two years, can be cheaper than cover that runs until retirement, particularly if you expect to return to work sooner.
3. Lower the amount of income covered Policies typically cover around 50% to 70% of your salary. Selecting a lower level of cover can bring costs down if you only need to cover essential outgoings.
4. Take into account any employer support If you receive sick pay or have access to group income protection through work, you may not need as much individual cover.
5. Compare policies carefully Prices can vary depending on your job, health and the level of cover. It is worth checking what is included, as cheaper policies may offer a lower level of protection.

Find out more: How exposed are your finances if something goes wrong?