How the payments carry on if life changes. A plain guide to the main types of protection, what each one does, the choices that matter and how claims work. General information, not a personal recommendation.

02 · What the state provides

What you could get if you stopped working.

It is worth knowing what support exists before deciding what cover you need. State help is real, but it is designed as a safety net rather than a replacement income, and most of it is means-tested or time-limited.

To put the first of those in context: Statutory Sick Pay works out at around £534 a month. A £200,000 repayment mortgage at 4.5% over 25 years costs around £1,112 a month before any other household bills.

Sources: GOV.UK benefit and pension rates 2026 to 2027; Turn2us guide to Support for Mortgage Interest. Rates are reviewed each April.

03 · Cover through work

Check what you already have.

Many employers provide some cover as part of the job. It is valuable, and it should be counted before buying anything new, so you do not pay twice for the same thing. The questions are how much it pays, for how long, and what happens if you change jobs.

Death in service

A lump sum paid if you die while employed, usually a multiple of salary — around four times is common. It normally stops the day you leave, cannot be taken with you, and may not be available again if your health has changed in the meantime.

Company sick pay

Some employers pay full salary for a set period before dropping to half pay or to Statutory Sick Pay. Your contract or staff handbook will say how long each stage lasts. This is the figure that decides how long an income protection policy could wait before paying.

Group income protection and critical illness

Less common, but valuable where it exists. Group income protection often pays for a limited period, such as two or five years, and is usually taxed as earnings. Like death in service, it is tied to the job.

04 · Life insurance

Life insurance

Pays out if you die during the policy term. Most often used to clear the mortgage, so the people you live with keep the home without the debt.

Pays out

If you die during the term. Most policies also pay early if you are diagnosed with a terminal illness and expected to live less than 12 months.

How it pays

A tax-free lump sum, usually.

Typically used for

Clearing a mortgage or other debts, or leaving a sum for dependants.

Ends

At the end of the term. If you outlive it, nothing is paid and there is no cash value.

Level term

The amount of cover stays the same for the whole term. It suits an interest-only mortgage, where the balance does not fall, or anyone who wants a fixed sum for their family regardless of how much of the mortgage is left.

Decreasing term

The cover reduces over the term, roughly in line with a repayment mortgage. Because the amount at risk falls each year, it is usually the cheapest way to cover a repayment mortgage. It reduces on an assumed interest rate, so if your mortgage rate is higher than that assumption, the cover can fall slightly faster than the balance. That is why it is set up with some headroom.

Joint or single policies

A joint policy covers two people and pays out once, on the first death, then ends. Two single policies cost a little more but pay out twice if both people die during the term, and each person keeps their own cover if the relationship ends.

Whole of life

Pays out whenever you die, rather than within a term. It costs considerably more and is usually used for inheritance tax planning rather than for a mortgage.

05 · Family income benefit

Family income benefit

A monthly income instead of a lump sum. If you die during the term, it pays your family a regular amount each month until the end of the term.

Pays out

If you die during the term.

How it pays

A monthly, tax-free income, from the claim until the original end date.

Typically used for

Replacing a salary while children are growing up: bills, childcare, everyday costs.

Cost

Usually lower than a lump-sum policy, because the total paid falls the later in the term a claim is made.

It works well alongside a policy that clears the mortgage. One removes the largest debt; the other replaces the income the household was used to. A common approach is to set the term to run until the youngest child is expected to be financially independent.

06 · Critical illness cover

Critical illness cover

Pays a lump sum if you are diagnosed with a specified serious illness and your condition meets the policy’s definition. You do not need to stop working to claim.

Pays out

On diagnosis of a condition listed in the policy, where it meets that policy’s definition. Many policies require you to survive a short period after diagnosis, often 10 or 14 days.

How it pays

A tax-free lump sum, usually.

Typically used for

Clearing or reducing the mortgage, covering time off work, adapting the home, or paying for treatment and recovery.

Common claims

Cancer accounted for 65% of individual critical illness claims paid in 2025. The average claim was £67,000.

What is covered

Policies from insurers that follow the Association of British Insurers’ minimum standards — which covers most of the UK market — include cancer, heart attack and stroke, defined to at least a common standard. Beyond those three, policies vary widely: some list a few dozen conditions, others more than a hundred. Many also make smaller, partial payments for less severe conditions, such as some early-stage cancers, without ending the main cover.

Why definitions matter more than the list

Two policies can both cover “cancer” and still treat the same diagnosis differently. The wording decides whether a claim is paid, so the comparison that matters is how each policy defines the conditions most likely to affect you, not the length of its list.

Children’s cover

Many policies include cover for your children at no extra cost, paying a smaller sum if a child is diagnosed with a covered condition.

Combined with life insurance

Critical illness can be added to a life policy as “life or earlier critical illness”. It pays once, on whichever happens first, and then the policy ends. A standalone critical illness policy costs more but leaves the life cover in place after a claim.

07 · Income protection

Income protection

Replaces part of your income if illness or injury stops you working. It pays monthly, for as long as you are unable to work, up to the end of the benefit period you choose.

Pays out

When you cannot work because of illness or injury, after the deferred period has passed.

How it pays

A monthly income, usually up to around 50–70% of gross earnings. Benefits from a policy you own personally are paid tax-free.

Typically used for

Keeping the mortgage and household bills paid while you recover.

Ends

When you return to work, when the benefit period ends, or at the end of the policy term — whichever comes first. You can usually claim again if you are unwell in future.

It is the cover most closely matched to the way mortgages usually stop being affordable. Illness and injury are far more common during a working life than death, and they can last for months or years. Musculoskeletal conditions made up a third of income protection claims paid in 2025, and mental health conditions almost a fifth.

The deferred period

How long you wait between stopping work and the policy starting to pay: commonly 4, 8, 13, 26 or 52 weeks. A longer wait costs less. The usual approach is to match it to the point your sick pay drops or your savings would run out, so the policy picks up where other support ends.

The benefit period

How long the policy will pay for on any one claim. Full-term policies pay until you return to work or the policy ends. Shorter, cheaper policies pay for a fixed period — often one, two or five years — which covers most claims but not the longest ones.

The definition of incapacity

This is the single most important part of the policy. Own occupation pays if you cannot do your own job. Suited occupation pays only if you cannot do your job or one similar to it. Any occupation pays only if you cannot do any work at all. Own occupation costs more but is the most straightforward to claim on, and it matters most for work that is physical or specialised.

Support while you are off

Many insurers provide rehabilitation, physiotherapy and return-to-work support during a claim, and some reduce rather than stop the benefit if you go back part-time. In 2025, insurers helped 7,600 people back to work through these services.

08 · Mortgage payment protection

Mortgage payment protection

Short-term cover for the mortgage payment itself. Sometimes called accident, sickness and unemployment cover.

Pays out

If you cannot work because of accident or sickness, and, if included, if you are made redundant.

How it pays

A monthly amount set to your mortgage payment, sometimes with a margin for bills.

How long

Usually for up to 12 months per claim. A few policies pay for 24 months.

Worth knowing

Policies usually have an initial period after you take them out in which unemployment claims are not accepted, and they often exclude existing medical conditions.

It is the only type of cover here that can include redundancy, which is its main strength. For long illnesses, the 12-month limit is the main weakness, and income protection usually does that job better. Some people use the two together.

09 · If you are self-employed

If you are self-employed.

Most of the safety net people take for granted comes from an employer. Working for yourself means arranging your own.

• No sick pay. Statutory Sick Pay needs an employer, so sole traders and partners do not receive it.
• No death in service. There is no employer scheme to fall back on.
• State support is limited. New Style ESA depends on your National Insurance record; Universal Credit is means-tested and unavailable with savings above £16,000.

Income protection is usually the starting point. Insurers base the benefit on your taxable profit, generally averaged over recent years, so up-to-date accounts or tax calculations make the application smoother. The deferred period is often matched to how long your business savings would cover the bills.

Company directors

If you work through your own limited company, two options can be paid for by the company rather than from your personal income:

• Relevant life cover — life insurance owned and paid for by the company, written in a trust for your family. Premiums are not usually treated as a benefit in kind, and it cannot include critical illness cover.
• Executive income protection — income protection owned by the company, which pays the benefit to the company so it can keep paying you.

Both have conditions that must be met for the tax treatment to apply, and your accountant should confirm they suit your company.

10 · Choices that change the cover

The choices that matter.

Two policies with the same name can behave very differently. These are the decisions that change what you are paying for.

11 · Writing a policy in trust

Writing a policy in trust.

Usually a simple form, completed when the policy starts, at no extra cost. It decides who receives the money and how quickly.

When a life policy is written in trust, the payout goes to trustees you choose rather than into your estate. That has three practical effects:

1. Speed. The money does not have to wait for probate, which can take many months, so it can reach your family while they need it most.
2. Control. You decide who benefits, and trustees can manage the money for children until they are older.
3. Inheritance tax. A payout that goes into your estate counts towards its value. Estates above the nil-rate band of £325,000 (plus up to £175,000 if a home passes to children or grandchildren) can face inheritance tax at 40%. A policy in trust is normally outside the estate.

Trusts are not right for every policy, and the tax treatment depends on your circumstances and can change. Where a trust is relevant, we explain the options as part of the advice and point you to specialist help if your situation needs it.

12 · Applying, honestly

Applying, honestly.

Every application asks about your health, lifestyle, family history and work. The answers are the basis of the cover, and they are checked when you claim.

The most common reason a protection claim is not paid is that something relevant was not disclosed on the application. It is rarely deliberate. It is usually a GP visit that seemed minor, a past symptom that resolved, or a question read too quickly.

• Answer every question fully, even where you think the answer will not matter.
• If you are unsure whether something counts, include it. The insurer can decide it is irrelevant; it cannot accept what it was never told.
• Check your answers before the application is submitted. We send them back to you to confirm in writing.

Disclosing a condition does not usually mean being refused. It can mean a higher premium, or an exclusion for that one condition, with the rest of the cover unaffected. That is a far better position than cover that fails when it is needed.

13 · How claims work

How claims work.

Claims are made directly to the insurer, by you or, for a life claim, by your family or trustees. The insurer will ask for evidence, such as medical reports or a death certificate, and assess it against the policy wording.

The large majority are paid: 97.9% of individual claims in 2025. Where a claim is not paid, it is usually because the condition did not meet the policy’s definition, or because relevant information was not disclosed when applying. Both are reasons to choose the definitions carefully and to answer the application in full.

Income protection claims tend to be more involved, because the insurer stays in contact through the claim and may offer rehabilitation. Many insurers also include support services with their policies, such as remote GP appointments, second medical opinions and counselling, which you can usually use without making a claim.

14 · When to look again

When to look again.

Cover set up for one stage of life may not fit the next. It is worth reviewing when:

• you move home, borrow more or remortgage;
• a child is born, or your household changes;
• your income changes significantly, or you become self-employed;
• you change jobs and lose or gain workplace benefits;
• you marry, separate or divorce.

We look at your cover each time your mortgage deal comes up for renewal, so it stays in step with what you owe and who depends on you.

15 · Sources

Sources and further reading.

Figures on this page are correct as at October 2026. Benefit rates are reviewed each April; tax rules can change.

• Association of British Insurers — protection claims paid in 2025
• GOV.UK — benefit and pension rates 2026 to 2027
• GOV.UK — Statutory Sick Pay
• Turn2us — Support for Mortgage Interest
• GOV.UK — inheritance tax thresholds
• MoneyHelper — free, government-backed money guidance