Maximum benefit you can insure, and the monthly tax-free payout.
Maximum benefit you can insure
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Monthly benefit (tax-free)
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Share of gross salary
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Your breakdown
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Insuring the salary, not a lump sum
Income protection is the cover that replaces your earnings if illness or injury keeps you off work for a long stretch. Unlike life cover, which pays once on death, or critical illness, which pays a lump sum on diagnosis, income protection pays a regular monthly benefit until you recover or reach the policy's end. It is the most under-bought policy in Britain, because people insure the car and the house but not the salary that pays for both. Statutory Sick Pay runs out fast and the state safety net is thin, so for most working households this is the cover that actually protects the budget.
Why the cap sits near 60 percent
Insurers will not let you insure your full salary. The benefit is capped, commonly around 60 percent of gross earnings, then reduced by any cover you already hold. The logic is deliberate: a payout must never leave you better off not working, or the incentive to recover weakens. The crucial UK detail is that a personal policy's benefit is paid tax-free, because you fund the premiums from money already taxed. So 60 percent of gross can replace a surprisingly large slice of your old take-home pay, since the benefit suffers no further income tax or National Insurance.
A £40,000 earner
On a £40,000 salary with no existing cover, a 60 percent cap means you can insure up to £24,000 a year, or £2,000 a month, paid tax-free while you are unable to work. Because your normal take-home on £40,000 is well under the gross figure, that £2,000 a month replaces a large part of it. The deferred period, the wait between falling ill and the benefit starting, is your main cost lever: a longer wait of 13 or 26 weeks cuts the premium sharply, and it costs you nothing if your employer pays sick leave during that gap.
Does income protection differ from PPI or critical illness?
Yes. Critical illness pays a one-off lump sum on diagnosis of a listed condition. Income protection pays an ongoing monthly income for almost any illness or injury that stops you working, which is why it is the broader safety net. The two complement rather than replace each other.