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Income protection insurance, explained: the cover that protects the salary itself
The most overlooked policy decoded — how income replacement works, what it pays and for how long,
Households insure the car, the home and the phone — and routinely leave uninsured the asset that pays for all of them. Income protection (income-replacement or disability insurance, by market) pays a regular benefit when illness or injury stops you working. It is the least-discussed and, for many earners, the most consequential policy there is.
How the product works
The mechanics are a monthly salary echo. You choose a benefit level — typically 50–70% of gross income; insurers cap it below full salary deliberately, because a benefit matching work income weakens the incentive to return. You choose a deferred period — the wait before benefits begin, from a few weeks to a year — and the same logic as an insurance excess applies: longer deferral, cheaper premium, with your emergency fund bridging the gap. And a benefit term: policies pay until you can work again, to a set age, or for a fixed maximum, with corresponding price steps. Claims are assessed medically and often ongoing — the insurer periodically reviews whether you remain unable to perform your occupation (the better policies) or any occupation (the cheaper, harsher wording — read which yours says).
What you may already have
Before buying, audit three layers. Employer cover: sick pay schemes and group disability policies are common in formal employment — check the percentage, duration and whether it ends with the job (it does, which is the argument for a personal policy alongside). State benefits: statutory sick pay and disability support exist in most tier-1 systems and are real but minimal — designed as floors, not salary replacements. Critical illness cover is the neighbouring product people confuse with it: a lump sum on diagnosis of listed conditions, versus income protection's monthly payment for inability to work — different triggers, different jobs, and the critical-illness explainer covers that one properly. The honest gap analysis: if a twelve-month inability to work would exhaust your savings and outlast every other layer, the gap is exactly what the policy is for.
Who needs it, and who does not
The strongest cases: single-income households (one salary, no fallback), the self-employed (no employer scheme, thin state support), and anyone whose savings runway is shorter than a plausible recovery. Weaker cases: dual incomes where one salary covers essentials, or savings deep enough to self-insure a multi-year absence — the same self-insurance boundary as the deductibles guide, scaled up to a salary. Underwriting is health-based and honest disclosure is non-negotiable: an undeclared condition is a future denied claim, per the claims guide.
The honest summary: income protection insures the only asset most households never think to list — the salary itself. Check your employer and state layers first, size the real gap honestly, and if the gap is a year of rent and school fees, this is the policy that should have been bought before the car's.
Sources and further reading
Links were reviewed 2026-09-25. Regulatory permissions, firm status and product terms can change; use the current official register before acting.
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