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Find out how income protection works, and why it's the one protection product every working UK adult should consider buying.

What is income protection insurance?


Formerly known as permanent health insurance (PHI), long-term income protection (IP) is an insurance policy that pays out if you're unable to work because of injury or illness. 

IP usually pays out until retirement, death or your return to work, although Short Term IP (Stip) policies are also available at a lower cost. Neither IP or Stip pays out if you're made redundant - but they will often provide 'back to work' help if you're off sick.


Is income protection the same as PPI?


Let's be clear - income protection isn't the same as the widely mis-sold payment protection insurance (PPI). Where PPI covers a particular debt and any payouts go to your lender, income protection hands you a tax-free proportion of your income if you're unable to work because of illness or injury. How you spend the money is up to you. If you think you've been mis-sold PPI, you can put in a complaint using our free PPI tool.


Why do I need IP?

Only a minority of employers support their staff for more than a year if they're off sick from work (see our guide to statutory sick pay). Given the low level of state benefits available, everyone of working age should consider IP. But when we asked the public, just 9% said they have some form of IP, compared with 41% who have life insurance and 16% who have private medical insurance (PMI).


One industry survey showed that less than a quarter of people deemed protecting their income to be essential, compared with 74% who said the same of needing access to broadband internet.


Millions of us have policies such as private medical insurance and payment protection insurance, sold to us over the years by salespeople who convinced us we needed protecting. However, while they were right about the protection, they were often wrong about the policies. The one protection policy every working adult in the UK should consider is the very one most of us don't have - income protection.

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