Protecting the People Who Depend on You: Life Cover, Income Protection and Sick Pay Explained

The question nobody likes to ask

We insure our homes, our cars and our phones without a second thought. Yet for most people the most valuable thing they have is their ability to earn. If that stopped, through illness, injury or death, how would the people who rely on you keep up with the rent or mortgage, the bills and everyday life?

This guide explains what support you may already have, and the main types of protection people consider. It doesn't recommend any product or provider, but it should help you understand the questions to ask.

Start with what you already have

Sick pay from your employer

If you're employed and too ill to work, you may be entitled to Statutory Sick Pay (SSP). It's paid for up to 28 weeks, but it's a modest weekly amount, far less than most people's normal pay. You can check the current rate and eligibility on gov.uk.

Many employers pay more than this, often full pay for a few weeks or months, then half pay. Your contract or staff handbook will set out exactly what you get. It's worth looking this up now rather than when you need it.

Death in service

Some employers provide death in service benefit, a lump sum paid to your family if you die while employed, often a multiple of your salary. It's valuable, but it usually ends when you leave that job.

State support

If you can't work because of illness or disability, you may be able to claim benefits such as Employment and Support Allowance or Universal Credit. These are a safety net rather than a replacement for your income.

Savings

Your emergency fund is your first line of defence. But even a healthy fund of several months won't stretch to a long-term illness or replace an income for years.

Income protection

Income protection pays a regular monthly amount if you can't work because of illness or injury. It typically replaces part of your income, not all of it, and pays until you return to work, reach the end of the policy term or retire, depending on the policy.

Points to understand:

• The waiting period (sometimes called the deferred period) is how long you must be off work before payments start. Matching it to when your sick pay drops or runs out can make cover more affordable.
• The definition of incapacity matters. Some policies pay if you can't do your own job; others only if you can't do any job.
• Short-term or long-term: some policies only pay for a year or two per claim, others until retirement.

Income protection is often overlooked, but long-term illness is far more common during working life than many people expect.

Life cover

Life insurance pays out if you die during the term of the policy. It's most important if someone depends on your income, or if you'd leave debts like a mortgage behind.

• Level term pays a fixed lump sum if you die within a set period. Often used to provide for a family while children are growing up.
• Decreasing term pays a lump sum that reduces over time, often used alongside a repayment mortgage.
• Family income benefit pays a regular income rather than a lump sum, until the end of the term. Some families find this easier to plan around.
• Whole of life pays out whenever you die, rather than within a set term, and is usually more expensive.

It's worth asking whether a policy can be written in trust. This can help the money reach the right people more quickly, and may keep it outside your estate for inheritance tax.

Critical illness cover

Critical illness cover pays a lump sum if you're diagnosed with one of a list of specified serious conditions. It can give breathing space to adapt your home, reduce your hours or pay off debts. Policies differ in which conditions they cover and how they define them, so reading the details matters.

How much is enough?

There's no single answer, but these questions help:

• What debts would need clearing, such as the mortgage?
• How much income would your family need each month, and for how many years?
• What would future costs like childcare or education look like?
• What cover do you already have through work?

Don't forget people who don't earn but whose contribution is essential. If a parent at home with young children were no longer there, the cost of replacing their care could be significant.

Before you buy anything

• Be completely honest on any application. Not disclosing a health condition can mean a claim is refused.
• Review your cover when life changes: a new home, a new baby, a new job or a pay rise.
• MoneyHelper has free, independent guidance on insurance and protection.