When does income protection pay out?

An income protection policy will pay out in the event you become too ill or injured to work.

The monthly payments you receive can help you keep up to date with essential financial commitments, such as mortgage/rental costs and household bills, while you focus on recovering.

Income protection pay out key points:

  • Between 50% - 70% of your usual earnings could be paid out
  • Payments are made monthly to mimic an income
  • Payments are tax-free
  • You could receive payments on a long-term or short-term basis
  • Also referred to as a benefit amount or monthly benefit

Why not compare income protection quotes using the fee-free service offered by Reassured?

A friendly member of the team can help you find the best policy for your personal circumstances.

You’ll also be able to compare quotes from the whole of the market with prices starting from just 20p-a-day ‡ .

Simply get in touch today for your free and no-obligation quotes.

Keep reading as we cover:

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How much does income protection pay out?

Income protection won’t pay out the full sum of your income, instead it will pay out a percentage of your usual pre-tax earnings.

There are a variety of providers on the market, who will offer to pay out a different percentage of your income. Typically, this is between 50% - 70%.

The table below shows some popular providers and the maximum percentage of your income they could pay out:

ProviderPercentage %
Aviva Up to 65%
Royal London review logo Up to 65%
British Friendly logo Up to 65%
LV= Up to 60%
Legal & General Up to 60%

This information mentioned above has been taken from each providers website and is correct as of 20/11/24

Comparing quotes can allow you to find the best policy to meet your needs. Simply contact Reassured today for your personalised, no-obligation and fee-free quotes.

How much income protection do you need?

What pay out amount do you need to help cover essential monthly living costs if you were unable to work? Simply enter your commitments to find out.

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£723 a month is the average monthly mortgage payment in the UK, with the average monthly rental price coming in at £700.

The majority of our monthly income will go towards rental or mortgage payments.

For this reason, it’s essential to have precautions in place to ensure you could keep up to date with your payments if you weren’t receiving your usual income.

Monthly income protection payments can help to cover this large expense and ensure you can stay in your home.
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According to the Money Advice Service, the average household spends £340 a month on household bills.

This includes electricity, gas, TV and broadband.
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Childcare costs are on the rise with it now costing £137.69 per week for part-time nursery for a child under the age of two.

That’s over £550 per month - is this an amount you’d be able to keep up with if you were unable to work?

Becoming ill could also result in the need for additional childcare while you attend doctors’ appointments or medical treatment.
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The average household in the UK spends around £97 a week on their food shop, totaling £388 a month.

While this may seem like a small amount in comparison to some of the other expenses mentioned, the food shop is often where we try to scrimp and save when we fall on hard times.

Income protection can take care of the cost of your weekly food shop, as well as many other essential costs.
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At the beginning of 2020, credit card debt in the UK was at £2.1 billion, with almost 27 million UK residents in some kind of debt.

Becoming unable to work could make it hard to keep up with credit card or loan payments (including car finance or other financed goods).

Failure to keep up with payments could result in additional interest being incurred or late fees issues - resulting in a higher total needing to be paid.
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The average spent on public transport each month comes to an average of £94.

This includes the cost of public transport, as well as petrol and diesel vehicles.

While this amount may reduce while you’re unable to work as you won’t need to commute there may be additional spending on public transportation if your illness or injury leaves you unable to drive.
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Your total cover estimate

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How long does income protection pay out for?

Income protection could pay out to you every month for a couple of years or until you reach retirement.

How long your policy will pay out to you is known as a ‘payment period’ and this can be long-term or short-term.

  • A long-term payment period could pay out to you until you reach retirement (if you’re unable to return to work)
  • A short-term payment period could pay out to you for 1, 2 or 5 years per claim

What payment period you opt for will ultimately depend on your personal needs.

If you’re eligible to receive sick pay from an employer or are on a strict budget, a short-term payment period could be sufficient to provide some form of cover.

However, if you have the budget and don’t receive financial aid, a long-term policy could help to provide peace of mind that you can still receive an income to support your loved ones even if you’re unable to work again.

Reassured can provide you with information about all of your options to help you find your ideal policy.

A friendly member of the team can take you through a full long-term vs short-term income protection comparison.

Does income protection pay out if I die?

No, income protection pays out for injury and illness. Therefore, a pay out won’t be made if you pass away.

Some policies may include what’s known as a ‘death benefit’ which will provide a lump sum payment to your loved ones if you pass away during the policy term.

This will typically be a set amount decided by the provider (for example £10,000) or a multiple of your benefit amount.

Not all providers will offer this benefit.

Compare income protection quotes from the whole of the marketing using Reassured, including providers who offer a death benefit.

If you’re looking for protection that could pay out to your loved ones after your passing, why not consider a life insurance policy?

Read our complete income protection vs life insurance page to find out more »

How long does it take for income protection to pay out?

An income protection policy won’t pay out straight away, you’ll need to wait for a deferred period to pass before any payments are made.

The deferred period will be agreed during the application process. The options may vary between providers, but the following are commonly available:

  • 4 weeks
  • 8 weeks
  • 13 weeks
  • 26 weeks
  • 52 weeks

You must still be unable to work once this period has passed in order for payments to commence.

If you recover and are able to return to work before the deferred period has come to an end, no payments will be made.

When setting your deferred period you may wish to consider any other savings or income available to you and how long this is likely to last you.

For example, if you receive sick pay, you may wish to have your deferred period line up with when your sick pay schedule comes to an end.

Whereas, if you don’t receive sick pay (such as the self-employed), a shorter deferred period could be more beneficial to prevent you having to dip into your own savings.

Does income protection pay out in a lump sum?

No, an income protection policy will pay out in monthly, tax-free, instalments.

This is to mimic an income to help you keep up with monthly financial commitments, such as:

Re payment mortgage house

Mortgage payments - Average monthly mortgage cost is £1,075[1].
Re payment mortgage house

Rental payments - Average monthly rental price in the UK is £745[2].
Bills utilities

Household bills - Average energy bill cost is £145 per month[3].
Childcare cost baby

Childcare costs - £302.10 per week is the average cost of sending a child under 2 to nursery (full-time)[4].
Leisure

Leisure costs - Average cost spent on leisure and recreational activities each month is £169 per month[5].
Icons transport

Transportation - £348 is spent on transport each month[5]
Debts

Debt & loan payments - The average unsecured debt per UK adult is £4,287[6].

Help to protect your daily living costs with income protection, starting from just 20p-a-day through Reassured.

Contact us today for your free quotes.

Does income protection get backdated?

Most commonly, income protection payments aren’t backdated.

The payments from an income protection policy will commence once the deferred period has ended and will cease once you return to work, your payment period comes to an end or your policy expires.

However, it can be possible to secure what’s known as ‘back-to-day-one’ cover which will backdate your payments to the first day you were unable to work.

Not all providers will offer back-to-day-one cover.

What is the maximum pay out for income protection?

The maximum amount that can be paid out is up to 70% of your usual income.

Providers may also have a maximum sum they will pay out.

For example, Royal London will cover up to 65% of the first £15,000 of your pre-tax earnings and 55% of the remainder up to a maximum of £250,000 per year.

The policy terms and conditions can vary significantly between the different providers, making comparing quotes essential in finding the right cover to meet your needs.

Reassured can help you compare quotes from all major UK providers, allowing you to find the policy with the most favourable terms.

When won’t income protection pay out?

There are some instances in which an income protection policy won’t pay out, including:

1. The illness/injury doesn’t meet the policy’s definition of incapacity.

A definition of incapacity helps to outline what makes you eligible to make a claim. For example:

  • Own occupation - You must be too ill/injured to carry out the day-to-day activities of your own job in order to claim
  • Suited occupation - You must be too ill/injured to carry out the day-to-day activities of your own job, as well as jobs that are suited to your skills and experience in order to claim
  • Any occupation - You must be unable to work at any job or unable to carry out basic daily tasks (such as writing your name) in order to claim

Most policies will have an ‘own occupation’ definition of incapacity, which is the most straightforward and comprehensive definition.

In this instance, if your condition doesn’t prevent you from doing your job, a claim won’t be accepted and no payments will be made.

2. Non-disclosure is discovered:

In 2023, Aviva found that the most common reason for claims not being paid was due to relevant health and lifestyle information not being shared during the application[7].

Providing incorrect details or withholding certain information from your provider is known as non-disclosure.

If non-disclosure is discovered when it comes to making a claim, any payments will be declined.

3. The condition isn’t covered:

An income protection policy won’t cover any conditions that are self-inflicted or that are as a result of alcohol/substance abuse.

It could also be possible to have any pre-existing medical conditions added as exclusions to your policy, this means you won’t be able to make a claim for this reason.

Income protection won’t protect you against any form of unemployment (including redundancy).

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What percentage of income protection policies pay out?

In 2021, 81.3% of all income protection claims were paid out, totalling £810,000,000[8].

The table below shows 6 of the UK’s leading income protection providers and their most recent pay out statistics:

ProviderPay out rate
Vitality round 94.6%
Aviva 92.5%
The Exeter Insurer Logo 96%
LV= 92%
British Friendly logo 89%
Legal & General 80%

The information displayed above has been taken from each providers website and is correct as of 20/11/24

Reassured can help you compare quotes from all of the above providers, simply get in touch today to find the best income protection for your needs.

Is income protection worth getting?

Income protection can be beneficial if you don’t receive sick pay, don’t have your own savings or are just worried about the financial repercussions of being unable to work.

The monthly payments you receive could prevent you from falling on hard times, having to borrow money from others or having to make cutbacks to your life.

There are a range of policy options available, such as long-term or short-term cover, to meet a range of needs and budgets.

If you’re unsure whether income protection is right for you and your loved ones, why not contact an expert?

An experienced broker, such as Reassured, can help to provide you with all the information you need and answer any questions.

Compare income protection quotes

Find the right income protection pay out to meet your needs by comparing multiple quotes.

By comparing quotes through Reassured you can find the provider who offers to pay out the greatest percentage of your income.

A friendly member of the team can also help you through the application and answer any questions you may have along the way.

Quotes through their fee-free service start from just 20p-a-day, so why not get in touch?

Compare Income Protection Quotes »

Sources:

[1] https://www.theguardian.com/money/article/2024/jun/24/mortgage-of-first-time-buyer-tops-1000-a-month-as-house-prices-and-rates-rise

[2] https://www.spareroom.co.uk/content/info-landlords/average-rent-uk/

[3] https://www.zoopla.co.uk/discover/buying/what-bills-will-i-have-when-i-own-a-house/

[4] https://www.daynurseries.co.uk/advice/childcare-costs-how-much-do-you-pay-in-the-uk

[5] https://www.nimblefins.co.uk/average-uk-household-budget

[6] https://themoneycharity.org.uk/money-statistics/

[7] https://connect.avivab2b.co.uk/adviser/articles/news/protection/Our-2023-individual-protection-claims-results/

[8] https://www.abi.org.uk/news/news-articles/2024/9/protection-insurers-pay-out-record-7.34-billion-to-support-individuals-and-families/

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