In the first quarter of 2025, an estimated 2.78 million UK citizens were economically inactive due to being on long-term sickness leave.
This number has risen considerably over the last six years and highlights the importance of having a good insurance policy in place. With the number of chronic illness cases increasing, it is vital to understand how best to protect yourself and your finances in the event that you have to take some time off work.
Income protection
Having income protection insurance in place can be vital if you find yourself unable to work due to illness. Depending on your circumstances, it may be worth having “just in case”, particularly if you would struggle to keep up costs if you found yourself unexpectedly without a salary for any amount of time.
Income protection insurance is designed to ensure you continue to receive regular income in the event that you cannot work. There are several policies available, including:
- Accident, sickness and unemployment (ASU): a short-term income protection policy that replaces your income should you be unable to work due to accident, sickness or involuntary redundancy. The policy pays you a tax-free monthly amount, usually up to 50% of your income, for a pre-defined period.
- Payment Protection Insurance (PPI): a policy designed to help you keep up with a specific loan or credit repayment for a short period if you’re unable to work. Most people use PPI to cover financial commitments like credit card payments or loan repayments.
- Mortgage Payment Protection Insurance: this insurance covers the cost of your monthly mortgage repayments if you fall ill or lose your job. You can typically decide how much you’d like your policy to pay out every month, but there are usually upper limits in place that depend on your current salary and employment status – roughly £1,500 to £2,000 a month.
Long term cover options
Most income protection policies are short-term and will only pay out for a set period, usually two years, until you get back on your feet. This may not be the most suitable option for chronic illnesses and so a long-term protection policy could be the best choice.
Long-term protection policies can provide a regular, tax-free income if you are unable to work for a longer period. Unlike critical illness cover, which pays out a lump sum if you are diagnosed with a specific illness, long-term income protection insurance pays out a regular income for a set period if you’re deemed too ill to work. Most long-term policies have a minimum term of five years and will go on until you reach 67 or your planned retirement age.
What about private medical cover?
Where income protection policies cover the income you are losing out on while being ill, private medical cover pays some or all of your medical bills if you are treated privately. This insurance also gives you a choice in the level of care you get, as well as how and when it is provided.
Getting treated privately, particularly for chronic health conditions, can be extremely expensive. However, with NHS data showing that waiting lists at 7.39 million and average waiting time for planned treatment 13.3 weeks, it is perhaps unsurprising that many individuals instead opt for private medical treatment. This can be made considerably more affordable with private medical cover.
Like all types of insurance, the cover you get will depend on the policy you buy and who you buy it from. The more basic policies typically pick up the costs of most in-patient treatments, such as tests and surgery, and day-care surgery. Some policies extend to out-patient treatments, such as specialists and consultants, and might pay you a small, fixed amount for each night you spend in an NHS hospital.
The right policy for you will depend on your health and the level of treatment you may potentially need in the future. Having both private medical cover and income protection will ensure that your bases are covered should you get treated privately and find yourself unable to work.
Planning ahead
Insurance will typically be cheaper if you begin your policy while you are still young and healthy. Even if you have never suffered from any considerable health issues, this could change when you least expect it and cause major financial issues. Insurance premiums rise with age and health conditions, so taking out insurance earlier means you can often pay less and be covered for a longer period.
Get in touch with a member of the George Square team today if you would like any further advice on choosing an insurance package that suits your needs.