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Income protection

There are other providers of Payment Protection Insurance [Short-Term Income Protection] and other products designed to protect you against loss of income. For impartial information about insurance, please visit the website at www.moneyadviceservice.org.uk.

Income protection (sometimes known as permanent health insurance or “PHI”) is a long term insurance contract which is designed to provide a replacement income if you become unable to work due to illness or injury.

Income protection allows the consumer to include a “deferred” period in which no benefit is payable even though the you are not working (this period can range from four to 104 weeks) and usually reflects the duration of any sick pay you may receive from your employer, or any other accident or sickness policies they may have.

A policy will have a fixed term – usually up to retirement age – and is permanent, which means that it does not have to be renewed annually. It also means that the benefits, once the insurer has agreed to pay them, are guaranteed to continue until:

  • You can return to work
  • The policy expires (ie you reach retirement) or
  • You die.


To make sure you have a positive incentive to return to work – and because benefits are generally paid tax-free – income protection policies usually provide anywhere between 50 to 75% of your pre-disability income, less state benefits and any other continuing income from similar accident or sickness insurances.

If you are self employed, the benefit amount can be set at the beginning of the policy to reflect fluctuating income levels, with some providers offering a guarantee.

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