Income Protection Insurance
Tax-efficient insurance to cover your costs when you can’t work
Don’t let illness or injury impact your income. Ensure you receive a regular wage until you’re back on your feet.
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What is Income Protection Insurance?
In your world, if you can’t work, you don’t earn. Whether you’re a contractor, limited company director, or self-employed professional, an unexpected illness or injury could severely impact your finances. That’s where Income Protection Insurance comes in.
Income Protection for self-employed professionals provides a regular, reliable income (usually 50% to 70% of your earnings) if you’re too ill or injured to work. It helps cover rent, mortgage payments, utilities, and daily expenses — until you’re back on your feet.
Directors may be able to receive up to 80% of their income, including dividends.
- Choose Your Monthly Benefit — Typically 50-70% of pre-tax earnings
- Pick Your Waiting Period — From 1 day to 12 months (also called a deferral period)
- Set Your Claim Period — Choose 2 years or full-term until retirement
- Select Premium Type — Level guaranteed or age-costed
Yes!
Did you know…
- In 2024, insurers paid out £204 million in individual Income Protection claims — a 16% increase from 2023
- 97.9% of claims were approved, making it one of the most reliable forms of insurance
- 34% of claims were due to musculoskeletal issues like back and joint pain — common among both manual and desk-based professionals
- Despite growing demand, only 14% of UK adults have Income Protection, and nearly 30% of the uninsured regret not having it
- UK workers lost an average of 4.4 days to sickness in 2024 (ONS)
Income Protection and IR35 – What Contractors Need to Know
IR35 is one of the most significant financial issues facing contractors in the UK today, yet it is rarely addressed by standard income protection policies. Whether you are inside or outside IR35 has a direct impact on how your income is assessed, how much cover you can arrange, and whether your policy should be held personally or through your limited company.
IR35 affects how much income protection you can arrange and whether it should be held personally or through your company. Getting this wrong could leave you significantly underinsured.
If you are operating outside IR35, you are typically paid via your limited company and take a combination of salary and dividends. Standard personal income protection policies may only assess your PAYE salary when calculating your benefit, potentially leaving a significant portion of your dividend income unprotected.
At Broadbench, we work with insurers who assess your total contract income, not just your salary, ensuring the cover you arrange genuinely reflects what you earn.
If you are inside IR35, your income is taxed at source as employment income, typically through an umbrella company or your end client’s payroll. This changes both your tax position and how insurers assess your earnings.
Inside IR35 contractors are eligible for personal income protection based on their net employment income. However, because your take-home pay is lower than it would be outside IR35, it is especially important to ensure your cover level is set correctly from the outset.
Many contractors move between inside and outside IR35 engagements over the course of their career. If your IR35 status changes, your income protection policy should be reviewed to ensure it still reflects your actual earnings and remains structured in the most tax-efficient way.
Broadbench advisers will review your protection arrangements whenever your IR35 status changes, ensuring your cover keeps pace with your income.
Benefits of Income Protection
1. Provides Regular Income if you Can’t Work
Replaces a portion of your salary if illness or injury prevents you from working, helping you meet living expenses.
2. Maintains Financial Stability
Ensures bills, mortgage, rent, and everyday costs can still be covered without dipping into savings.
3. Protects long-term Financial Plans
Helps you continue paying off debts, funding retirement, or supporting your family’s goals even while off work.
4. Supports recovery without stress
With income assured, you can focus on getting better rather than worrying about finances.
5. Flexible Benefit Periods
Policies can cover short-term recovery or provide payments until retirement age, depending on your needs.
6. Covers Any Illness
Income Protection covers you for any illness or injury that prevents you from working. This differs from Critical Illness Cover which covers you for a set list of conditions.
7. Peace of Mind for You and Your Family
Knowing you have a financial safety net reduces anxiety about potential disruptions to income.
Common Questions About Income Protection Insurance
A common question with uncomfortable answers.
- What if illness stopped you working for 3 months, 6 months or more?
- Could your savings cover your rent, mortgage, or business costs?
- How would your family or business cope with lost income?
This is why more people are searching for:
- Income Protection for self-employed
- How to get sick pay as a freelancer
- Income Protection vs Critical Illness — what’s the difference? Read our blog here
Absolutely. Without employer sick pay, this is your only true safety net.
Income Protection pays a regular wage while you’re unable to work. Critical Illness pays a lump sum if you’re diagnosed with a serious listed illness.
Yes, if paid via your limited company. Otherwise, the payout is tax-free if premiums are paid personally.
Yes. Premiums are cheaper the earlier you buy. And no one expects to be out of work due to illness — until it happens.
In 2024, 97.9% of claims were paid. Broadbench only works with trusted, top-rated providers.
We think so.
Unlike Critical Illness Insurance, Income Protection cover exists to keep you going while you’re ill or injured and help get you back to work faster. Not only does it provide peace of mind that you can still pay your bills each month, but it could also help you cover the cost of treatment or rehabilitation.
Please note:
All statements concerning the tax treatment of products and their benefits are based on our understanding of current tax law and HM Revenue and Customs’ practice. Levels and bases of tax relief are subject to change.
How Income Protection Works
- Choose Your Monthly Benefit — Typically 50-70% of pre-tax earnings
- Pick Your Waiting Period — From 1 day to 12 months (also called a deferral period)
- Set Your Claim Period — Choose 2 years or full-term until retirement
- Select Premium Type — Level guaranteed or age-costed
Why you shouldn’t rely on State benefits
Could you survive on this?
- Statutory Sick Pay (SSP): £109.40/week (employed only)
- Self-employed? No SSP. You must apply for Employment and Support Allowance
Why Choose Broadbench for Income Protection?
We specialise in tailored advice for contractors, freelancers, company directors, and business owners. Whether you’re looking for:
- Sick pay for contractors and freelancers
- Long-term sick pay cover
- Business owner Income Protection insurance
- Or Income Protection for limited company directors
We build the right plan around your profession, income structure, and future goals.
FAQs
What is Income Protection Insurance?
Income Protection is an insurance policy that pays you a regular wage if you’re unable to work due to illness or injury. It will continue to pay you a salary until you’re ready to return to work, retire or if you pass away (dependent on the level of benefit taken).
Does IR35 affect my income protection?
Yes. Your IR35 status determines how your income is assessed by insurers and whether your policy is best held personally or through your limited company.
Outside IR35, executive income protection through your company can cover salary and dividends up to 80% of total earnings.
Inside IR35, personal income protection is typically the appropriate route, based on your employment income.
Broadbench advisers will assess your specific IR35 position and recommend the most appropriate structure.
Can I get income protection if I work through an umbrella company?
Contractors working through an umbrella company are treated as employees for tax purposes and can arrange personal income protection based on their employment income. Some umbrella companies offer group income protection as part of their package, but the level of cover is often limited. A personal policy arranged through Broadbench will typically provide more comprehensive and portable cover.
Will Income Protection protect me if I can’t find a contract?
No. This is a common misconception of Income Protection; it only covers you when you are unable to work due to illness or injury. It does not cover gaps in between employment. If you’re looking for unemployment payment, you will have to apply for JSA.
What happens to my income protection if my IR35 status changes?
If you move from outside to inside IR35, or vice versa, your income protection should be reviewed. A change in IR35 status affects your take-home pay, your tax position, and whether your policy should be held personally or through your company. Broadbench will review your arrangements whenever your situation changes to ensure your cover remains appropriate.
What factors impact an Income Protection premium?
Your age, health, line of work and if you have smoked in the last 12 months can have an impact on your monthly premium. Therefore, it’s important to speak to an Income Protection expert to get a rough idea of what cover you can expect and at what cost before applying.
What happens if I change contracts?
If your new contract pays more or less than the previous contract (or the contract you were on when you started the policy), you can contact your insurer to increase or decrease the amount of coverage you need.
Why do I need Income Protection Insurance?
People in permanent jobs have the benefit of receiving sick pay. Those earning a day don’t have this luxury which is why it’s so important to have Income Protection. It gives you the peace of mind that if you become ill, you’ll be paid a regular wage so you can look after the bills until you’re well enough to return to work.
Need a safety net for when you’re sick?
Fill out the form below to arrange a time to speak to an Income Protection Insurance expert.