Sick pay and income protection
Critical illness cover or income protection: a lump sum or an income
Both policies pay when you are alive but your finances are hit. Enter a lump sum, your outgoings and a monthly benefit to compare them in months.
Independent site, not an insurer, broker or government service: benefit claims are made only on GOV.UK.
A lump sum or a monthly income
Example, not your result yet· change a figure to see yours
The lump sum pays outgoings for
28.6 months
| Income protection over the absence | £36,000 |
| Share of outgoings it covers | 71% |
| Lump sum minus income paid | £24,000 |
Income protection pays after the deferred period and only while you cannot work; a lump sum pays once if the policy definition is met.
Critical illness cover pays a single tax-free lump sum if the insured person meets one of the definitions listed in the policy, whether or not they can still work. Income protection pays a monthly benefit only while they cannot work, after a deferred period, until they recover or the claim period ends. They answer different questions. A lump sum of £60,000 pays £2,100 of monthly outgoings for 28.6 months, or clears part of a mortgage at once. An income protection benefit of £1,500 a month over a two-year absence pays £36,000, and keeps paying for as long as the claim lasts within the policy term. The lump sum is paid once, so it suits a debt or a one-off cost; the income suits a long absence. This site describes the contracts and the money, not the conditions a policy lists: those are in each insurer’s policy wording.
Rates read and sums checked by Radif Partners · Editorial policy · How the figures are worked out
How long a lump sum lasts
The simplest way to size a lump sum is in months of outgoings. The table divides each sum by £2,100 a month, with no interest and no other income. A household that keeps working after a claim would make it last longer; one that also loses an income would spend it faster.
| Lump sum | Months of outgoings | Years |
|---|---|---|
| £25,000 | 11.9 months | 1.0 years |
| £50,000 | 23.8 months | 2.0 years |
| £75,000 | 35.7 months | 3.0 years |
| £100,000 | 47.6 months | 4.0 years |
| £150,000 | 71.4 months | 6.0 years |
What a monthly benefit adds up to
An income benefit of £1,500 a month pays in proportion to the length of the absence. The last column is what remains short each month against the same outgoings, before state support.
| Absence after the deferred period | Income protection paid | Still short |
|---|---|---|
| 6 months | £9,000 | £3,600 |
| 12 months | £18,000 | £7,200 |
| 24 months | £36,000 | £14,400 |
| 60 months | £90,000 | £36,000 |
The state support alongside either policy
An employee who cannot work gets Statutory Sick Pay of £123.25 a week at most, for up to 28 weeks, then possibly New Style ESA from £95.55 a week. These are paid on the inability to work, not on a policy definition, so they run alongside income protection and alongside any lump sum. The income protection timeline shows the state support week by week.
Reading the contracts
A critical illness policy pays when the insured person meets a definition in the policy, and some definitions require a level of severity. Policies differ in how many definitions they list, whether they pay a partial amount for less severe claims, and whether children are covered. An income protection policy pays when the insured person cannot do their job, or any job, depending on its definition of incapacity, after the deferred period. The key features document of each policy lists all of this without asking for your details.
Income protection benefits from a policy you pay for yourself are free of income tax under section 735 of ITTOIA 2005. A combined policy that adds critical illness to life cover pays once; the life and critical illness page shows what that means for the family.
Choosing a sum
A simple way to set a critical illness sum is to decide what it must do. Clearing a mortgage needs the balance; paying the bills for a period needs that many months of outgoings, as in the first table; adapting a home or paying for a partner to stop work needs a separate estimate. Many people pick one of these rather than all of them, because the premium rises with the sum. Where income protection is already in place, the lump sum can be smaller, since it no longer has to replace pay over a long absence.