Can you get 100% Income Protection Insurance:MSE


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Do Insurers allow 100% Income Protection Insurance?

Income Protection Insurance 100 percent is designed to help protect your salary & lifestyle IF you’re unable to earning a living due to accident, sickness or hospitalisation.

So can you get 100% Income Protection Insurance? NO, Insurers don’t allow 💯 100% income protection cover of your gross annual salary. Why not? Because you could then be financially better off not working & being sick, than well.

What we mean here is…for example let’s say you are an employed manager & you earned around £40,000pa gross.

So after deducting standard UK income taxes calculation, your ‘after tax’ net salary is then reduced down to around £32,000pa.

Alternatively, you are self employed tradesman & your usual annual gross turnover is around £75,000pa.

But after deducting various business expenses & allowances, your net ‘after tax’ income declarable is then reduced down to around £40,000pa.

Can you claim to either the HMRC & Insurers, that you actually declare that your net take-home pay is then gross £40,000pa or £75,000pa?

Well the answer’s NO; They will both say your income protection policy cannot make a 100% payout benefit equaling either your total gross salary or turnover.

In other words, as mentioned you would then be financially better off longer term being sick, than even being well.

We will now look more at what technically you are allowed on income protection insurances, if you were off work due to an accident or sickness (not redundancy).


Is it Tax Free 100% Income Protection Insurance?

Yes, in the UK it’s a Tax Free 💯 100% Income Protection Insurance payout – whether you are self employed or employed.

Its both free of income & capital gains tax and you’re also not charged tax on the premiums.

This means upon claim, you may receive 100 percent income protection benefits (also known as permanent health insurance or PHI) as there is no further UK tax to pay on a ‘personal cover policy’ payouts.

However, to receive it all tax free this means you cannot claim any tax relief on your premiums, via your business for example.

Note: The tax rules are therefore often different for a ‘business income protection insurance’ policy cover like executive income protection or key person.

Although you maybe eligible for business tax relief on those premiums, HMRC might then tax any benefits that are paid from the insurers policy back to the company. 

Do Insurers use 100% Income Annual Calculations?

Most insurers will take for income protection insurance 100 percent into account your previous 12 months income, when working out their maximum benefits they could realistically insure you for. 

They do realize incomes can fluctuate due to the economy however, especially if you are freelance self employed or a contractor.

For example, you may have been earning around £45,000pa but due the pandemic lockdown, your income then dropped down by 50%.

So, being flexible there will be situations where Insurers will consider taking an average of your income over a longer period of say up to 24 or 36 months.

The insurance company will need to be advised by you at the point of claim, the background to your income fluctuations prior history.

At that stage Insurers would ideally need to see 12 months payslips, a P60 or P11D if employed to validate any claims.

Or if self employed, a copy of your recent self assessment tax returns – all to proove your income for example over the last few years.

income-protection-100-percent-uk-benefits

What’s the Maximum Income Protection Benefit UK?

Typically, UK Insurers coverage may vary quite widely here for their maximum income protection insurance benefit calculations (but an average is 2/3rds of gross salary).

This however can then vary between the various percentages allowable eg; capped at 80% of annual net earnings or say upto 65% of gross salary.

Or the maximum amounts the Insurance Company are willing to insure overall for them to take on the risk.

For example, it’s maybe capped upto £20,000 per month benefit for some bigger insurers especially for those on larger salaries.

Alternatively for some friendly societies, it maybe limited to a maximum income allowance base of £100,000pa salary.

Please speak to our brokers here for helpful market guidance, as to whom maybe best for your personal situation. Let’s have a look at a few typical examples;

Income Calculation Example A:

Provider A income protection cover offers calculations…

*65% on the first £15,000 of pre-tax earnings, plus up to 55% of the remainder.

So, if you earned £100,000pa then in the 2nd example this Insurer A could offer you income protection policy total cover of = £56,500pa

ie; £9,750 on the first £15,000pa & a lower £46,750 on the next £85,000pa.

Income Calculation Example B:

Provider B offers different income insurance cover calculations…

*Upto 65% for a set amount of earnings eg; £60,000pa.

Then, they may reduce their tiered benefit amount basis above £60,000pa income – down to a lower 50%.

So, if you earned £100,000pa then that example Insurer B could offer you income protection policy total cover of = £59,000pa

ie; £39,000 on the first £60,000pa & then a lower £20,000 on the next £40,000pa.

Income Calculation Example C:

Provider C offers another income protection cover calculation formula…

*60% of annual gross earnings & with no other percentage splits

So, if you earned £100,000pa then in the 3rd example this Insurer C could then offer you income protection policy total cover of = £60,000pa

So it seems Provider C offers the highest cover levels – so they must be the go to Insurance Providers to use?

However it is not always as simple as that, as it could be some Insurers may then consider your health, lifestyle & occupation higher risks, so increase their premiums accordingly.

Or alternatively they won’t even offer cover for your job role eg; airline pilots or perhaps put exclusions onto your income protection policy.

In other words, let us shop around & get you a professional broker deal to fit your overall situation & circumstances.

In conclusion, some of these maximum income protection levels operates abit like HMRC tiered tax rates in that you may earn so much at basic rates, before being taxed at any additional higher rates.

UK Insurers – Maximum Income Protection Insurance 2024

InsurersMaximum Income Protection
Split 1
Maximum Income Protection
Split 2
AIG60% of first £60k income50% above £60k (Max: £250k)
Aviva65% of first £60k income45% above £60k (Max: £240k)
British Friendly65% of first £60k income45% above £60k (Max: £100k)
Cirencester Friendly65% of first £80k incomeMax: £80k pa
Exeter60% of first £100k income40% above £100k (Max: £120k)
Guardian 182165% of first £60k income50% upto £100k / 45% above £100k
Holloway Friendly65% of first £65k incomeMax: £65k
LV=60% of annual incomeMax: £250k
Legal & General60% of first £60k income50% above £60k (Max: £240k)
Royal London65% of first £15k income55% above (Max: £250k)
Shepherds Friendly70% of gross incomeMax upto £49k
Vitality Life60% of first £60k income50% above £60k (Max: £200k)
Zurich80% of net incomeMax: £240k
Table covers UK Insurers main income protection plans (excluding their budget versions)

income protection cover waiting periods

What’s a Deferred Waiting Period mean re Costs & Benefits?

As mentioned already, you cannot be 100% financially better off sick than well, with regards to income protection insurance.

Most insurers could offer their plans with various deferred time periods eg; insurance benefits paid after 1 week or 4 weeks, 8 weeks or 13 weeks, 26 weeks or 52 weeks wait.

So why do the insurers have these waiting periods ie; why can’t I get paid out immediately then?

*Insurance Deferral Period Example:

Let’s say your employment terms means your work agrees to pay you for upto 13 weeks sickpay, due to an accident or illness etc.

Then you cannot expect to also claim on your PHI policy (or double up your salary) during this waiting period also, as you are still receiving a taxable income.

In this instance, you would set up an income protection with a 13 weeks deferred period, because you may no longer have income after that time.

Conversely, if you are self-employed with little or no savings, then you may your protection insurance cover to start after a shorter period of say 1 week or maybe 1 month.

Note: The shorter that deferral period or wait (the more expensive that income protection insurance costs) ie; the insurers claim risks are much higher.

The impact of the recent pandemic on Insurers claims highlighted this. Many people with income protection claiming for being off sick with Covid for several weeks or months.

You could also chose a dual deferred period if for example your employer paid you full sickpay for 3 months, but then 1/2 sickpay for 3 months (& then nothing but State benefits).

In that instance you could choose to have split cover or 2 plans. One policy starting after 3 months & the other policy after 6 months.

Chances of making a 100% income insurance claim

What’s Budget vs Comprehensive Income Protection?

Comprehensive PHI insurance cover means potentially it could payout indefinately towards your set retirement end date, if you could sadly never work again due to an accident or sickness.

The Insurers should also cover you for your own occupation – meaning they would payout if you are unable to perform your usual job role.

Alternatively, Budget PHI insurance cover typically may payout for upto 1 or 2 or 5 years per each claim, even if the income protection policy runs upto your retirement.

The cheaper plan could be also not be classed as (unable to do your own occupation) but any occupation or various specified job tasks meaning the chances of a valid claim are harder.

It is therefore sometimes cheaper for a reason, as it could be harder to claim on or won’t payout as long for you or the insurance company.

The premiums here can either be cheaper budget age-costed, where the costs go up each year. Or more expensive initially, where the premiums are fixed (with optional indexation).

100% Income Protection Insurance Benefit Guaranteed?

Again, many UK Insurers income protection policy guarantees & insurance offerings may vary here.

Some Insurer’s T&C’s may offer you a fixed guaranteed benefit amount that should your salary or work hours drop during the preceding annual period, for whatever reason.

For example, if you salary insurance policy benefit paid was originally set up for £1,500pm.

But then your income drops because you had to switch employers (having being made redundant), then the Insurers may still pay out £1,500pm.

In other words, we suggest always using a broker deal & let them help source & compare the 100’s income protection rates available.

Unlimited Claims or Restricted Claims?

Dependant on the type of PHI plan you take out, you could make an unlimited number of claims during the income protection policy lifetime.

As brokers, we would add this also takes into account the insurance policies deferred or waiting period.

For example, if you had a 4 weeks deferral period & then made a valid car accident claim which the Insurers paid out after & until you returned back to work after 16 weeks.

However, sadly a few months later you are signed off work again now suffering post traumatic stress. In this instance then, you would still be able to make another claim but now have to wait the initial 4 weeks again.

Note: Policy benefits will end as soon as you are fit again to return for work to perform your job role

Or the payment term finishes, if say your budget plan was limited to only 12 or 24 months per each claim (rather than comprehensive & being unable to ever work again).

Unlike say critical illness insurance which typically may payout a main serious illness lump sum claim but then end.

100% no sick pay | income insurance protection

Do State Benefits affect Income Protection?

This all depends on the insurance companies income protection insurance T&C’s ie; it can vary between companies

So what happens should you need to make valid claim on both your income protection & also likewise claim any UK State benefits?

Then any payments made like Statutory Sick Pay (SSP), Universal Credit or ESA, means some insurers could also take these Government benefits into their calculations.

These potentially could therefore reduce down from 100% income protection insurance payouts.

Alternatively, other insurers won’t even take these benefits into their calculations meaning you get 100 income protection claim made.

Be aware here if doing any comparison with no advice, as some providers initial quotes can seem much cheaper here for this exact reason.

As brokers, we recommend you check the impact for any means tested benefits on your income insurance at outset beforehand ie; you are aware should you have to make a claim

Can you have more than one Income Protection Policy?

The straight forward answer is ‘Yes’ BUT this will mean Insurers will then add up the total amount of cover you have at claim, to check it’s not breaking their overall T&C’s.

Critical Illness Cover UK claims
*stats changing re Pandemic 100% Income Protection Insurance UK

*Example of Multiple Policies

Let’s say you have taken out several insurance protection style plans & over various different time periods.

The first policy was originally set up as mortgage payments protection MPPI, which covers you if unable to work through accident, sickness or unemployment (ASU).

This covers your regular £1,500pm mortgage payments plus £500pm bills after 1 month, but it’s limited for upto 12 months each claim.

The premiums on this are also subject 100% to insurance premium tax (unlike income protection).

They taken out as part of your regular mortgage payments by the Building Society when you took it out as a first time buyer.

All direct debits are shown on your bank statement as just one main monthly payment to the lender, so you are unsure what you have.

The second policy was later setup for full Income Protection PHI & bought online with no advice through a major comparison website.

It was covering 60% of gross annual salary = £2,000pm paid out on claim after 1 month and paid for full term upto to retirement in claim (not just limited to 12 months per claim).

At the point of a long term claim for illness or accident that may keep you off work for several years or longer, the 2 Insurers would probably take each others plan into account in their assessments.

It could then be that the 2nd policy for full Income Protection PHI may possibly only kick in and payout after 12 months wait ie; the original MPPI was covering that first year period.

You would also have to carry on paying the premiums on the 2nd plan until the full 12 months have elapsed & you are still off work through sickness or accident.

Alternatively, if both protection plans were each covering similar amounts for upto 12 months per claim, then you may have wasted your money on one of them.

Note: You can however also have both income protection insurance & critical illness cover policies.

For example, you could have a mortgage protection critical illness cover. So that if you were diagnosed with a serious illness, the Insurers policy could help repay your mortgage.

Then alongside, if your budget allows it the income protection could then help to cover your ongoing bills & expenses. As brokers we say both can work well together.


*Does Martin Lewis 100% recommend Income Protection?

Martin Lewis recommend 100% income protection Insurance?

MSE Martin Lewis says YES it’s worth looking 100% at Income Protection Insurance Policies.

He points out that this policy type pays you a regular income – if you’re unable to work due to illness or disability for a set period (generally a year or two).

As Brokers, we were unsure if MSE meant here if you could be off sick for a year or two…because as mentioned above, many UK Insurers also do offer full term income protection in claim (not just for 1 or 2 years in claim).

Income protection insurance he comments will usually pay a proportion of your salary, for example two-thirds, so that essential spending is covered.

He say income protection (in comparison to critical illness cover) generally includes a greater range of illnesses, but it can also be more expensive.

MSE generally says insurance is always a cheap financial lifeline but that ultimate choice is always yours.

The Money Saving Expert also says when it comes to deciding between the two types of insurance, it could be worth speaking to a financial adviser.

In general, Martin Lewis says you will often find the “Cheapest Quotes by going to a Broker” & NOT via Comparison Sites.



Martin Lewis suggests being the Money Expert “NEVER BLINDLY BUY DIRECT” expensive policy offers either via a Bank or One Insurer ie; Shop around or use a Broker.

Lastly, the MoneySavingExpert also said generally remember, not all insurers plans are featured on insurance comparison sites. We would agree here – so let’s help you shop around for your best broker deals.

In terms of the large range of income protection insurance products available, Money Saving Expert are fully impartial with all their best buy reviews. As you maybe aware, neither Martin nor MSE never endorse products.

Note: Yes, they mention individual products & services on MSE site, but they make it very clear don’t ‘support’ them.

Conclusion: 100 Percent worth getting Income Protection Insurance?

Consider 100 percent how much is income protection insurance worth to you, if you could not provide financially for yourself & family.

Those bills won’t stop sadly coming in, just because you are off work re sickness or an accident.

100% income protection can help provide that lifeline that may also allow you to not drown financially & therefore allow you to recover without any further stress.

Hopefully by now you will have answered the question ‘is income protection 100 percent worth it’?

Unsure, get our professional broker advice on getting your income & lifestyle insured.

Article on 100 Income Protection Insurance by Martyn Spencer Financial Adviser 2024

For reassurance re health for men & women – we review many of the best brands selling ‘PHI in Insurance’ for Income Protection & Life Insurance in UK (inc NI)