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Income protection insurance Martin Lewis

Martin Lewis CBE (financial journalist) is the founder of the UK’s most well-known and commonly used financial information service website MoneySavingExpert.com.

MoneySavingExpert.com launched in 2003 for just £100. The website has since become the biggest source of free financial guidance to millions of households. Martin Lewis hit celebrity status in 2012 after launching ‘The Martin Lewis Money Show’ on ITV. This was initially co-presented with Saira Khan, now co-presented with Angellica Bell.

Millions of us will refer to financial experts like Martin Lewis, for impartial information and support in day to day financial decisions. You may also be familiar with some of the Martin Lewis financial campaigns or government lobbies. The most famous campaign was against mis-sold PPI (Payment Protection Insurance) from January 2011 to December 2019.

Martin Lewis often talks about insurance products including the below interview on This Morning, where he discusses life insurance.

Martin Lewis’ Guide to Life Insurance – How Much? | This Morning
A picture of a stopwatch

60-Second Summary – Income Protection Insurance Martin Lewis

Martin Lewis doesn’t say much about income protection insurance online or in interviews which is disappointing, as income protection insurance is an extremely useful policy. Here we explore all the things he has said and how income protection insurance works for UK customers.

  • Income protection insurance will pay out a monthly cash sum to you if you are signed off work for 4 or more weeks by a doctor or GP. This money can provide vital financial support in covering important bills and expenses until you are back on your feet (e.g. mortgage/rent payments and utilities).
  • Martin Lewis and MoneySavingExpert.com do provide full guides around topics like sick pay, which is why it is so surprising that there is little information included about policies like income protection.
  • The cheapest way to get income protection insurance Martin Lewis suggests is a discount broker, as an income protection specialist will know exactly which insurers will work best for your situation and the level of cover you need.

Martin Lewis campaigns

Here are some of the key Martin Lewis/ MSE campaigns from the last 20 years:

The Bank Charges Campaign

Bank charges campaign in 2005 was the most famous and possibly hardest fought campaign, which lasted over 5 years.

In November 2009, the campaign had a major set-back when the Supreme Court had ruled that bank charges were fair. It was ruled that this formed part of its fees for current account services. Ultimately, Lewis provided updated templates to consumers enabling them to recover unfair bank charges on the grounds of financial difficulties.

The Energy Bills Campaign

Energy bills campaign launched in 2008 with his appearance on a number of TV and radio shows.

This campaign targeted unfair pricing from energy providers with “price cap” strategies. This led to a far reaching review of energy pricing from providers (including British Gas) and an overall reduction in costs for British households.

The Student Finance Campaign

Student finance campaign in 2011 also led to subtle changes in student loans and tuition fees charges in the Browne Review.

Martin Lewis launched an appeal directly to the Prime Minister to prevent further problems being caused by retroactive increases in student loan costs.

You may be familiar with the ‘Martin Lewis Guide to Life Insurance’ on ITV’s This Morning Programme with Holly Willoughby and Phil Schofield.

Income protection insurance Martin Lewis

One of the best and cheapest ways to protect your income if you can’t work because of sickness or an accident is income protection insurance.

Income protection insurance pays out a monthly income if you are unable to work due to accident, sickness or injury. It is effectively an insurance policy paid monthly by the policyholder that offers flexible cover against loss of earnings.

Looking at MoneySavingExpert.com there is very little information about income protection insurance from Martin Lewis or his team. It is quite disappointing that such a high profile financial website does not offer any guidance about such a common personal protection policy.

We consider income protection insurance to be an extremely important policy and especially for people with little or no support from their employer. The current economy leaves millions exposed to extreme financial hardship without proper cover in place.

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Even though you won’t find much income protection insurance Martin Lewis information on the MoneySavingExpert.com website, there are other guides that you might find useful.

We do find it slightly odd that there is a full guide for Martin Lewis sick pay information and resources, but no reference to income protection insurance. This type of situation is exactly the scenario where this type of cover is relevant.

The latest sick pay guide on MSE was updated on 6 April 2023 to provide up to date information about your rights.

Types of financial support available for sickness:

  • Contractual sick pay
  • Statutory sick pay (SSP)

Income protection insurance is specifically designed to provide additional financial support to you and your family. This can be very helpful where Sick Pay is insufficient.

Read more about Sick Pay

How does income protection insurance work?

There are several different types of income protection insurance policies. This includes short term and long term cover which are the most common.

When you take out income protection insurance you will be covered if you are unable to work for periods usually from 4 weeks to 24 months. Some long-term policies will cover you up to retirement age. Income protection covers you if you are unable to work due to illness or injury which can cover important expenses. This includes mortgage payments, outstanding debts, cost of living etc.

It can be confusing when you are considering a new policy and the main guidance from income protection insurance Martin Lewis, is to get proper advice. This rule applies to the majority of these types of protection including:

Types of income protection insurance

There are two main types of income protection insurance which are:

Short term income protection insurance

Short term income protection insurance provides cover against short term sickness or injury for up to 12 or 24 months for each claim. This is the most common and cheapest type of income protection insurance because it provides cover to a maximum of 24 months.

Long term income protection insurance

Long term income protection insurance provides cover for more serious claims that can last for several years, or even to retirement. A more serious claim can be for cancer for example or a heart attack then it would pay out for as long as you are unable to work.

Other types of income protection insurance

There are two other types of income protection, which many people choose as cost effective alternatives. These are:

  • Personal accident insurance – This policy will pay out a cash lump sum if you are injured in an accident to help support you during your recovery. This is cheaper than standard income protection insurance, but doesn’t pay out for sickness
  • Guaranteed sick pay – This is a cheaper version of income protection which is good for people on a tighter budget, but will only pay out for 6 months maximum.

Martin Lewis recommends a range of options and policies that can protect you and your family against financial difficulties. There is very little advice or recommendation for income protection insurance from Martin Lewis.

It’s difficult to find out whether you should or shouldn’t get an income protection insurance policy according to Martin Lewis or MoneySavingExpert.com.

There are some recommendations on MoneySavingExpert.com for certain types of cover such as critical illness insurance. You may have read a section on the website relating to critical or serious illness insurance which suggests that this policy is not worthwhile.

What is income protection insurance for?

If you are employed or self-employed and don’t get support from your employer or have savings, then you should really consider protecting your income.

The days of generous employee benefits packages are long gone and most employers will only pay out for a limited period. Even in the public sector there have been significant cuts to the amounts and level of support provided by employers or government.

Many employers would have provided benefits and protection that provide support for sickness or long term absences. The current economy has restricted many employers from being able to offer this and government support has also been limited.

If you are unable to work due to sickness then you might be entitled to claim Statutory Sick Pay (SSP) of £109.40 per week for up to 28 weeks, as long as you qualify:

  • Illness MUST be for more than 4 consecutive days
  • Employees or agency workers only (including full-time, part-time and zero-hours)
  • Minimum salary of £123 per week (average)

How much income protection insurance do I need?

There are some simple facts to consider when you are looking for a new or to renew an income protection insurance policy, including:

  • Affordability and how much you are able to budget for each month
  • Expenditure which is how much you would need your policy to pay out each month to pay your mortgage, rent and other essential outgoings
  • Maximum payout is usually 60% of your gross monthly income for most insurance providers (this is a rule to prevent financially incentivising people for being off sick)

One of the biggest factors in calculating your amount of income protection insurance is thinking about how much money you would need each month if you couldn’t work. Some of the other things to think about are how much your outgoings would reduce if you weren’t travelling to work for example.

Income protection insurance is also considerably more expensive for older people than for younger applicants. It generally works out far cheaper to take out a policy at a younger age over a longer term than someone in their 40’s or 50’s for example.

Our usual recommendation would be to consider the minimum amount that you need, such as:

  • Mortgage or rent
  • Bills (e.g. Gas, Electricity, Council Tax, telephone etc.)
  • Food

If you find out how much cover would be for this amount and then see whether you are able to afford more for non-essential outgoings, including:

  • Sky TV
  • Insurances
  • School fees
  • Clothing

You should also consider the type of income protection insurance that you need and you can afford.

  • Short-term income protection insurance
  • Long-term income protection insurance

Other options that you can consider to help manage the cost of cover are:

  • Deferred periods (waiting periods)
  • Age rated (premiums increase as you get older)
  • Reviewable

As with the Martin Lewis life insurance guide, here are some essential points to help you to figure out which options might be best.

1) Maximum amount of cover which is between 60% and 80% of your gross monthly income (before tax)

This limit is imposed by all income protection insurance providers to prevent incentivising people from claiming and being better off out of work. It also means that claimants are more likely to return to work more quickly within reason.

2) Declare any pre-existing medical conditions or health problems that you are asked about on your application form

Even more important than life insurance, it is critical that you are very honest about any pre-existing medical conditions, health problems or family history issues. If you fail to disclose information that may have a material impact on your cover or premiums, then it is likely that claims won’t be paid out.

3) Income protection premiums are also based on your occupation and any risks relating to hazardous jobs

People in certain occupations may pay higher premiums than those who have lower risk jobs, such as office jobs and administrational roles. Insurance providers will categorise occupations based on the risk of claims and how long you might be unable to work for if you’re sick or injured.

People in manual jobs are more likely to be unable to work for longer periods if they are sick or injured.

4) Income protection insurance can be cancelled or switched at any time without any penalty

There is a common misconception that these types of insurance policies can’t be cancelled or changed without notice or penalty. This is simply not true and it is possible to cancel or switch your cover to another insurer without any penalty or notice.

5) You can’t claim on more than one income protection insurance policy at the same time

If you’re thinking about trying to cheat the system and take out a couple of different policies with different insurance providers to increase your claim, save yourself money and don’t bother. You can only claim on one income protection insurance policy at any one time and for one period, to prevent fraudulent claims.

Insurance providers will check for multiple payments from different insurance companies to make sure that this isn’t happening.

6) You will often be asked to provide proof of your income from your bank account, wage slips or accountant to show how much you earn

The way that insurance providers check your income to make sure that your claim is relative to the amount that you earn is from evidence using wage slips or accountants for self-employed. Most insurance providers will do this at the point of claim so that they’re using the most recent information to assess your claim.

How to cut the cost of income protection insurance quotes

One of the main issues or problems with income protection insurance is that it can be expensive, especially if you’re looking at long-term cover.

There are some general rules that can help you to significantly reduce your premiums and keep it affordable for most of us. Ultimately, you should make sure that your cover is appropriate to a degree, but also the premiums need to be reasonable for your budget.

You should get quotes from a discount income protection insurance broker to get the lowest price cover from the most well-known insurers.

The table below shows you what the premiums are for income protection insurance from using the various different options that you’ve got available to you, and as you can see the cost varies significantly.

[TABLE]

What’s the difference between advice and non-advice?

  • Non-advised is often slightly cheaper and more simple than advice so can be best for someone who understands the products and knows what they want.
  • Advised will usually give you more guidance on the type of cover that might suit you best as well as which is most suitable for you needs and budget.

How to complain about income protection insurance

If you buy income protection insurance and aren’t happy with the product or service you have received, you are always within your rights to complain. All insurance companies will have complaints procedures in place to resolve any issues their customers have.

There are also other services you can contact for support and advice:

Financial Ombudsman Service Logo

Making a complaint to the Financial Ombudsman Service

The Financial Ombudsman Service (FOS) is an impartial and free service for financial services customers in the UK. This service can be used to settle any disputes between life insurance companies and their customers in the United Kingdom. If they feel that you have suffered any financial loss as a result of your life insurance policy, then they may rule for compensation to be awarded.

Telephone – 0800 023 4567 (or 0300 123 9123)

Telephone (outside the UK) – 0207 964 0500

Emailcomplaint.info@financial-ombudsman.org.uk

British Insurance Broker's Association (BIBA) Logo

What to do if you can’t find life insurance

There are certain options and support mechanisms that are available to you if you’re struggling to find life insurance. One of the bodies to support consumers with life insurance is the British Insurance Brokers Association (BIBA) which covers all insurance services in the United Kingdom.

BIBA provides a Find Insurance service that allows you to search for a recommended member who might be able to help you.

Telephone (Insurance Help)- 0370 950 1790

Telephone (General Enquiries) – 0344 7700 266

Emailenquiries@biba.org.uk

As we have mentioned above, there are several main options when you’re thinking about arranging a new income protection insurance policy.

It’s important to think about what works best for you as well as making sure that you get the best prices. Getting proper income protection insurance advice can help you in the long-term as it might prevent making mistakes and choosing the wrong cover.

Speaking to a discount income protection insurance broker will also give you proper security as they are regulated, so you have the Financial Ombudsman Service (FOS) if there are any issues.

If you need a quote for discount income protection insurance Martin Lewis would suggest speaking to a specialist.

Here we have more of our helpful guides about income protection insurance and how it works:

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Is it worth having income protection insurance?

Income protection insurance can be extremely useful and very important for anyone who is unable to work due to sickness or an injury (e.g. from an accident, sports, work etc.). Essentially, income protection insurance pays out monthly to replace any lost earnings while you are unfit or unable to work.

Payments for income protection insurance can be used to pay your mortgage, rent, other credit commitments, food bills, utilities and other regular outgoings.

Common myths about income protection insurance:

  • Income Protection Insurance won’t pay out
  • Statutory Sick Pay (SSP) from the government will cover me
  • The cost of Income Protection Insurance is high
  • People with medical conditions can't have Income Protection Insurance
  • My employer will help support me
What does income protection insurance cover?

As a rule of thumb, income protection insurance will pay out a regular monthly tax-free payment to you if you can’t work and you are signed off by a doctor. You will need to provide supporting evidence from a medical professional such as your GP and proof of income from your employer or accountant.

Example: Sarah was involved in a car accident which resulted in a serious back and neck injury that prevented her from being able to drive for 6 months. She was able to claim on her income protection policy after 4 week for the remaining 5 months until she was able to move and drive again. She would also usually be able to claim for rehabilitation and physiotherapy to help her to return to work as planned.

Do I need income protection insurance for a mortgage?

Income protection insurance and mortgage life insurance are not compulsory for getting a mortgage in the United Kingdom. Some mortgage lenders might ask for you to get insurance as a condition of the mortgage offer in some circumstances but this is rare.

It is strongly recommended to have insurance to protect you and your family if you have a mortgage and other credit commitments. If you consider what the financial impact would be if you were unable to work due to accident, sickness or injury, and even if you were to die.

Most common mortgage protection insurance policies:

  • Buildings insurance
  • Mortgage life insurance
  • Income protection insurance
  • Critical illness insurance
  • Mortgage payment protection insurance (Accident, Sickness & Redundancy
Is income protection insurance tax free?

Payments from an income protection insurance claim are almost always tax-free, apart from some business income protection policies. This is because you pay tax on the premiums for personal income protection insurance at source (i.e. the premiums are paid from your net monthly salary).

The same applies to life insurance premiums and payouts, effectively you have already paid tax on the premiums that you have paid. There are some other possible tax implications that may apply in certain circumstances so you should seek proper advice or guidance if you have any specific questions.

Which is the best income protection insurance UK?

It’s very difficult to say overall which income protection insurance policies or providers are the best, simply because there are so many different options and types of cover. You can get income protection insurance from an even wider range of insurance providers than life insurance, so your choice is even greater.

The most common income protection insurance policy is:

  • Short term income protection insurance (24 months)
  • 4-week deferred period (pays out after 1 month of absence)
  • Guaranteed premiums (fixed premiums)
  • Underwritten income protection insurance

There are several other cover options for income protection insurance (e.g. long-term, age rated, reviewable premiums, guaranteed acceptance and 0 weeks to 12 months deferred periods).

The top 5 income protection insurance providers according to research by Defaqto are:

  1. Aviva (Trustpilot score: 4.0 out of 5.0)
  2. British Friendly Society (Trustpilot score: 4.1 out of 5.0)
  3. LV= (Trustpilot score: 4.5 out of 5.0)
  4. Royal London (Trustpilot score: 4.0 out of 5.0)
  5. Shepherds Friendly (Trustpilot score: 4.3 out of 5.0)
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