Income Protection Insurance Guide

Your best-ever guide from the experts at Black Lion Insurance

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Your one-stop introduction and super-easy guide to everything you ever wanted to know about income protection.  And, lots more useful information you didn’t even know you needed.

Income Protection.  In our view, it’s the ONE product that every working adult needs to think about. 

Here at Black Lion Insurance, our aim is to educate our clients to a comfort-zone level of confidence and insurance knowledge.  Essentially, we want you to feel and know that you’ve made the best-informed choices about a vitally important part of your life: your future financial security.

Above all, we’re here to help

We hope that you find this guide an excellent starting point to deciding on the most advantageous income protection cover for you, and your family.  After all, the right income protection could mean the difference between comfort and calamity.

 So.  How Are You Today?

You’ve woken up and you’ve gone to work as usual, or maybe you’re in the office at home.  To be honest, nothing unusual has happened and you’re getting stuff done.

Perhaps you’re a busy contractor, a self-employed IT professional or you’re a well-valued employee.

Basically, you’re earning a good income.

Everything is going well.

You expect this situation to continue for several years to income, ideally until you retire.

Having an accident isn’t in your life plan, nor is getting sick.  Losing your job isn’t on your To Do list either.  Why would any of these things happen, not least when you’re fit, healthy and well?  Why indeed.  Having an accident, becoming seriously ill, or losing your job may not be something you’re even thinking of.

It Could Happen to You

Unfortunately, being unable to work through serious illness or an accident isn’t necessary something that only happens to other people.

Here at Black Lion Insurance, we hope that you will never need us.  However, should the worst happen, you could be thankful that you took out a practical income protection insurance policy to help you get back on track towards recovery and your enjoyable, busy life.

The benefits could be immense.  That rainy day can and does happen.  Welcome to income protection insurance advice.  Welcome to Black Lion Insurance.

What is Income Protection?

Simply defined, an income protection insurance policy will pay out if you’re unable to work because of sickness or injury.  It’s a type of salary insurance, paying between 50% and 70% of your gross annual salary on a monthly basis.

Income protection usually pays out until you retire, die or return to work.

You may choose a shorter-term policy, say one or two years.  The premiums can be lower but as the name implies, they have a limited time span.

Longer term income protection is more expensive, but could be the safety net you need, even paying out if you need to claim more than once during the lifetime of the policy.  Payments could be used to cover your mortgage, bills, groceries – whatever you need to help you back on the road to recovery.

If you have dependents, income protection could be your family lifeline.

Important Things to Consider

OK, let’s get practical.

Honesty (always the best policy) is key here.

If you smoke, you’ll be pleased to know that you can get cover, but it’s best to take advice.  Often, income protection (IP) is more expensive. You know what you need to do.

If you have an existing health condition, you must disclose it. It goes without saying that it’s likely that your claim will be turned down if something comes to light that wasn’t flagged up.

If you take advice – and we recommend that you do this – you’ll be asked about your current savings, your main outgoings, the income you will need, and what your hobbies are.  It’s quite personal, so be aware of this.

Check with your employer (if relevant) whether you have a group insurance policy; you don’t want to over “over-covered” as this could restrict payments.

Seek advice, ideally from Black Lion Insurance, if it seems too expensive.  We may be able to help you reduce premiums with a longer deferred period, for example. Also, check in with us about state benefits and how these may be affected.

Ask about the “extras” available, such as rehabilitation or therapy to help you back to work.

Why You Need Income Protection

We think that everyone needs to think carefully about income protection and understand that it’s not a nice-to-have option, it’s an essential.

In our opinion, State sickness benefits are simply not enough to live on, and whilst employers may support their staff financially, very few do this for longer than one year.

What happens after that?

Life insurance and private health insurance are different, the latter only paying out costs for private medical treatment directly to the healthcare provider.  The former pays out a lump sum to your loved ones when you die.

Also, many people aren’t saving enough for a rainy day.

That pot of money you’ve always meant to put aside may not have materialised by now.  Life got in the way.  Moreover, in addition to a mortgage, personal debt stalks many individuals. And, debt doesn’t suddenly go away when you’re unable to work.  If anything, it gets worse.

Income Protection vs. Critical Illness Cover

Here at Black Lion, we offer excellent advice on both these types of insurance.  They sound very similar, but they’re not.  To clear up any confusion, income protection IS different from critical illness cover.

Here are the main distinctions:

  • Firstly, IP pays out monthly, while critical illness over pays a lump sum.
  • Secondly, income protection tends to be used to cover more general outgoings. This compares to critical illness cover, which in general is used to pay off an outstanding mortgage.
  • Lastly, own occupation covers a broader range of conditions and illnesses than CI. In other words, the latter may not provide adequate cover for your personal circumstances.

Which is best? As always, our advice is to contact us for more information.  We’re happy to help.

How Income Protection Works

In a nutshell, should you be unable to work due to illness or an injury, an income protection policy (IPP) will pay out a proportion of your salary before tax on a monthly basis.  Normally, up to 70%, in fact.

Income protection can be powerful and flexible.

It goes without saying that some insurers offer more benefits than others.  Not only can it pay for your life insurance, hospitalisation, your IP premiums can be waivered in the event of a claim.

You may even get payments when you get back to work and a no-deferral period if you get ill again.

Importantly, income protection covers a wide range of illnesses or conditions.  This could include mental health problems such as depression or other situations, such as problems with your back; bad enough to stop you from moving but not always covered by critical illness insurance.

The Time to Consider Taking Out an Income Protection Policy…

…Is now.  It really, really is.

If you leave it too late you may not get the best options.  “Too late” could be when your health starts to become unstable (or you fear it may do so), or if you are close to retiring.

If you’re fit, healthy and dare we say it, young, now is the time.

You’ll most likely benefit from affordable premiums, and you may even be able to lock your monthly premiums to the same amount if you take out a premium guarantee.  You’ll be paying the same amount in 25 years, say, as you are now.  It’s obvious that your insurance cover payments will in effect decrease, due to inflation.

Other life changes could be your income protection catalyst, for example:

  • Becoming self-employed

    Congratulations, you’re now your own boss. That’s great, but now you have no sick pay.  Not a single penny.  It’s all down to you.  If you can’t work due to illness or an accident, your income will stop immediately.  Income protection could protect you financially while you return to health

  • Changing Jobs

    If your new employer doesn’t offer group sick pay, or only has limited sick pay, it’s well worth taking advice on income protection.

  • The Birth of a Child

    Again, congratulations.  We know that you’re aware of this, but you now have dependents.  Literally, there’s a very small person now depending on you to earn money to raise him or her.  Is your income protected?

  • Buying a Property

    You’ve just made the biggest financial decision of your life.  You now own bricks and mortar.  Your new home.  And, it feels wonderful, of course it does.  Make sure it stays that way by taking advice on how best to protect your income to ensure that you can keep paying the mortgage.

Any change of life circumstances could benefit from a call to Black Lion Insurance.  Perhaps you already have an IPP.  That’s good.  We may be able to amend it for you to take your life changes into account.

Are you Self-Employed?  Are you a Company Director?

Business owners, company directors and the self-employed (especially contractors) can benefit from higher income levels and the sense of achievement that comes with being in charge of your own destiny.

The downside is that you have no financial protection.  If you are unable to work due to sickness, an accident or a sudden illness, you may struggle financially.

Keeping a roof over your head and the electricity switched on will become paramount.

Income protection is a flexible solution that can be tailored to your needs.  You declare your income to HMRC as a self-employed individual, so good advice on the right policy will ensure that you pay exactly what you need, and no more.

If you’re a company director paying yourself in dividends as well as a salary draw-down, an income protection policy will make sure that both of these things can be protected.

The Costs of Income Protection

Obviously, IP is a tailor-made product, hence why we would always recommend that you take advice from the team here at Black Lion Insurance.

Your premiums will reflect your own personal circumstances, so it’s not possible to offer definitive costs.  Your adviser will ask you about your job, age, health, medical history and so on.

Also, many insurers will categorise your job or career by risk, with a 1-4 sliding scale:

  • Class 1. Professional, including managers, administration staff, computer programmers and secretaries.
  • Class 2. Some workers with high business mileage, skilled manual workers, engineers and shop workers. And, perhaps oddly, florists.
  • Class 3. Different types of manual workers, care workers, plumbers and teachers.
  • Class 4. Heavy manual workers, construction workers, mechanics, people who work in bars.

Clearly, working on a building site is riskier than working behind a computer all day, so the costs of your cover will depend on what you do and how you do it.

Also, the following will need to be considered:

Your monthly benefit.  You’ll need to pay more to get more.

Your deferred period.  The gap between you ceasing work and when your insurance payments start.  A lengthier period could mean lower costs.

Your policy cease age.  The longer the policy, the higher the premiums (on the whole)

Your medical history.  Your premiums may increase if you have a current medical condition, or an exclusion may be put on the policy.

Your smoker status.  This goes without saying.

Your age. You know what we’re going to say.  The older you are when you take out your policy, the higher the premiums will probably be.

Do you jump out of planes in your spare time? Or is needlepoint more your thing? Again, we think you’re following us on this one.  The embroidery enthusiast will pay less in premiums; the thrill-seeker, more.

How to Claim on Your Income Protection Policy

First of all, don’t worry.

If you’ve taken out a policy via Black Lion Insurance, you already know that you have the best cover for your needs.  As the name implies, it’s there to protect you.

Let’s get started.  You will need an official diagnosis of your condition from your doctor with which to take medical leave, if you have a job (rather than self-employed).

Then, contact your insurance provider as soon as you can.

Once fully furnished with all the information they need, they will inform you when payments will start, normally after your agreed deferred period – see below.  Bear in mind that you’ll need to keep paying your premiums until the end of this period.

And now, focus on getting better.  The money will be paid monthly, tax-free.

If you have a long-term policy, the good news is that you will continue to receive monthly payments until you retire or until the end of the policy.  With a short-term policy, payments will cease at the end of the policy period.

Remember Your Deferred Period

If you drive, you’ll be familiar with an insurance excess.

Your deferred period in an income protection policy is comparable.  How?  Because in both cases, you are likely to pay less for your cover, depending on the time and money sacrifices you are prepared to make in both cases.

In a nutshell, the longer your deferred period, the lower the perceived risk.  Therefore, you’re likely to pay less for your cover.

The Importance of Own Occupation Cover

This aspect of income protection has its own section.  As will be seen, it’s significant in the fine-detailed world of insurance.

Do discuss own occupation cover with your consultant regarding income protection.  This point in your insurance policy states that should you fall ill or have an accident, you are no longer able to carry out your specific profession or competency, rather than any job.

In our opinion, own occupation cover is the best feature of the four definitions of incapacity category.  (The others are suited occupation, any occupation and activities of daily living).  It’s precise, concise and to the point.

Again, ask us if you’re not sure.  We’re here to offer you as much advice as we can.

More Insurance Advice

Black Lion Insurance aims to be your go-to specialist in insurance.  We also offer advice on:

Life Insurance. Financial support to your loved ones if you die.

Critical Illness Cover.  A tax-free lump sum if you’re diagnosed with a serious illness that’s covered by your policy.

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Income Protection Insurance.  Which is Best? Compare the Top UK Income Protection Insurance Providers

Here’s a guide to the Black Lion income protection insurance partners.

We feel that they represent the best of the best.

A combination of great insurance products and best-in-class advice from Black Lion Insurance?  Sounds good.  Don’t forget, we’re whole of market advisers with access to the best products, and importantly, the unbiased knowledge that you need.

Come to us for advice.

With our bargaining and negotiating power, we could get you super-competitive options.  We’ll research the very best terms across all our providers.

And, you’re busy.  Do you really have the time to do all that digging around?  See below for some great reasons to be speaking to Black Lion Insurance.

Click on the provider icons for more information.

Income Protection Insurance.  Enjoy 3 Months' FREE cover

Fill in the form on this page with the code BL3MF to qualify for THREE MONTHS’ FREE COVER when you set up your income protection policy with us.


Founded in 1831 as Scottish Equitable, and with their headquarters still in Edinburgh, Aegon won the Cover Excellence award for Best Service Provider in 2016.

Maximum cover: 55% of gross earnings

2016 payout rate: 85%

Guaranteed/Reviewable premiums

Own Occupation


AIG were founded in 2008 as Aegas Protect and were acquired by American International Group Inc. in 2014.  In 2016, they won the Paradigm Lender and Provider award for “Best Income Protection Provider, 2016”.

Maximum cover: Up to 60% of gross earnings

Guaranteed/Reviewable premiums


Founded as Norwich Union in 1797, this long-established insurance provider merged with CGU plc in 2000 to become Aviva.  It is the largest insurance group in the UK.  Aviva won the “Best Customer Service” award for the second year running in 2017.

Maximum cover: 55% of gross earnings

2016 payout rate: 92.6%

Guaranteed/Reviewable premiums


Legal & General was founded in London in 1836 in Chancery Lane.  This major insurer won the Cover Customer Care Award for Best Claims Management in 2017.

Maximum cover: 60% of gross earnings up to £60,000 and 50% of additional earnings

2016 payout rate: 94.4%

Guaranteed Premiums

Own Occupation/Activities of Daily Living


Founded in 1843 as a burial society, LV is considered to be the number one provider of income protection insurance in the UK.  It has over 1 million members and 5.8 million customers.  LV won the Moneyfacts award and Cover Excellence award in 2017 for “Best Income Protection”

Maximum cover: 60% of gross earnings

2016 payout rate: 90%

Guaranteed/Reviewable premiums


Royal London mutual society was established in 1861, originally as a friendly society.   It was named company of the year for two years running in the FT Adviser Online Innovation and Service awards.

Maximum  cover: 65% of gross earnings up to £15,000 and 55% of additional earnings

2016 payout rate:  95.6%

Guaranteed premiums


A newcomer to the market in 2007, Vitality received a 5-star Defaqto rating in 2017.  Indeed, Vitality had received this award for the previous 8 years in a row.

Maximum cover: 60% of gross earnings up to £30,000 and 50% of additional earnings.

2016 payout rate: 94%

Guaranteed /Reviewable premiums

Own Occupation/Activities of Daily Living/Special Incapacity Definition


Founded in Switzerland in 1872, Zurich is one of the world’s largest insurance groups.  They offer a wide range of general insurance products, including life insurance, savings, pensions and other investments.

In each of the 3 years to 2016, Zurich paid at least 98% of all Life Insurance claims.

The Importance of Advice

All income protection products broadly do the same thing – they protect your income should you be unable to work due to sickness or injury.

But, as we’re sure you will agree, there’s more to it than that.

You are different from your neighbour over the road.  Your neighbour has a different lifestyle to the family around the corner.  A farmer in the wilds of Scotland earns his living in distinct ways from a doctor, or a dentist in central London, say.

In fact, you could say that everyone’s existence is as diverse as the patterns in snowflakes – unique, in other words.

Also, in our opinion, there are a lot of singular insurance products on the market. One size does not fit all, nor should it.  Talk to the insurance experts here at Black Lion to help:

Find the right insurer for you.  Each insurance provider views a person’s career, lifestyle, smoker status and hobbies slightly differently.  Our role is to find you the best options across all of them.

Find the right policy options for you. Talk to us about your expected retirement age, your main outgoings, your savings, how much you need to live on, and the state of your health. We’ll be able to recommend the best option for you based on the information you give us.

Save you time.  Don’t spend hours on the internet when you could refer to us for information on everything you need to know.  Life is too short!

Find more insurers.  It’s likely that Black Lion Insurance will have access to more insurance products than you may find online yourself.  We’ll aim to find the very best value options and cover specifically for your circumstances.

Income Protection FAQs

From our most commonly asked question "Do I need income protection insurance?" to information on what affects the cost of your policy.

What our clients are saying

Black Lion insurance were great in helping me get through the countless jargon and pitfalls when it comes to setting up insurance. I was thankfully recommended to them by a colleague and they made the process seamless ensuring I have the most appropriate policy for me.

I’m an IT contractor and I wasn’t sure if I was eligible for this cover, however, to my delight, not only could I have the cover, but I could pay it through my Ltd company. I was covered within an hour of getting in contact. Very prompt and informative service!
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About Us

Part of Halo Consulting, Black Lion Insurance are a dedicated team of insurance consultants with years of experience in guiding our clients to a solution that meets their specific needs. We specialise in helping both employed and self employed individuals, as well as business owners on a variety of solutions, which range from life insurance, income protection insurance, keyman insurance and shareholder protection insurance.