What is income protection insurance?
Insurance that pays you a monthly income if illness or injury stops you working. Payments start after a waiting period you choose and carry on until you can work again, the policy ends or you retire. It matters most for self-employed people, who have no employer sick pay behind them.
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What does income protection cover?
Most policies pay out if any illness or injury stops you doing your job, from a bad back to cancer or a mental health condition. They pay a monthly amount after the waiting period ends. What counts as 'unable to work', the exclusions and how long a claim can last all vary, so read the policy wording.
Is income protection tax deductible in the UK?
Not if you pay for it yourself. HMRC does not let a sole trader deduct premiums for cover on their own health from business profits. The other side of that rule is that payouts from a policy you pay for personally, out of taxed income, are generally tax-free. Different rules apply if a limited company pays.
Does income protection cover pregnancy?
A normal pregnancy is not usually treated as an illness, so it won't lead to a claim on its own. Complications that stop you working may be covered, but some insurers exclude them or add terms if you apply while pregnant. Check the wording before you buy, and look at Maternity Allowance separately.
Still not sure what this means for you?
Ask Helena, our AI assistant. She gives general information, not financial advice.