I do, quite frequently, think about getting health insurance. To this day I have yet to actually have something push me to take the leap and get a policy, but I feel a couple of bad experiences away from doing so.

My experiences with NHS healthcare have been varied, unfortunately. But largely this has not been for myself (thankfully), rather I have watched (and helped) family go through the system a lot.

I have had both parents in the system to a significant degree at varying times. My wife has been through the maternity system with our first son (and is currently on her way through it a second time).

I’m not going to go into the details of those experiences as they are deeply personal, but safe to say they were very mixed – particularly for my parents.

The maternity and subsequent paediatric provision has always been great, I will say. It will be interesting to see how experiencing the same process two years on differs with our second child due in December.

Where my personal sentiment on the NHS begins to chafe really comes down to the primary services we receive. I can count on one finger the number of times I’ve ever actually been granted access to my current GP, for example.

We routinely have to queue, sometimes for up to an hour, for our local pharmacies to fulfil prescriptions. This is thanks in large part to a major national pharmacy chain withdrawing from our town and putting pressure on the remaining provision.

And dental – don’t get me started. We live in a dental desert and have to drive over an hour away for an appointment. That appointment isn’t even on the NHS, those are rarer than (healthy!) hens teeth in Devon.

But does this push me into getting private medical insurance for our family? Our problem is largely a primary care deficiency.

More from Edmund Greaves

Time for health insurance?

The reality for our situation is that it feels hard to apportion some of our monthly income to a health insurance policy because, frankly, so much of my income already goes on taxes which pay for the NHS.

The Government has a fun tool you can use to tell you exactly how much of your taxes went where in a given tax year, out of interest. I am aware this is getting into the territory of crying over a sunk-cost fallacy but it hurts to look nonetheless.

In the most recent tax year, 2023/24 – just over 20% of my tax went to the NHS. This works out at just under £4,000 a year. My partner earns less than me (and ironically enough is a n NHS nurse which provides its own insights into the Byzantine Health Empire which I will forgo for today), but between us I’d calculate we’re roughly paying in around £6,000 a year just to the health system.

This is great inasmuch as we’ve actually used it quite a lot having our son etc. But it is also certainly a lot more than we’d pay for equivalent private health insurance, which comes without the queues and more free smart watches. For context – a private policy runs between £70 and £200 depending on circumstances.

So even if myself and my wife were both paying the top end (we wouldn’t because we’re under 40) we’d still be paying less than the equivalent in tax.

Controversially (and perhaps under-noticed as of yet) political parties such as Reform have floated giving people tax breaks for opting out of NHS care and using private insurance. Given the potential cost differential already mentioned, this could be an extremely compelling way to save tax for people who would have lower annual premiums (i.e. the healthy and young).

But the implications are fraught especially given that it is the taxes of the healthiest who are essentially footing the bill for those in poor health in the nationalised system.

In totality, the Government spent around £258 billion on healthcare in 2024. That’s a big number. For context, the Government spend £1,279 billion on everything it does in the tax year 2024/25.

Brits spent around £46 billion on so-called ‘out-of-pocket’ healthcare expenditure in 2024. What this means is for all the money spent on healthcare in the UK, around 15% came out of our own cash. The Government spends 81% of the money. Just 2.6% of spending is done by private health insurance schemes.

Interestingly, the out-of-pocket spending used to be higher – 20% in 1997. At that time health insurance accounted for just under 4%. What this tells me is that there is still a significant unsatisfied demand for private healthcare coverage. Why?

In this week’s podcast we were joined by Dr Katie Tryon, chief commercial officer at health insurance provider Vitality. We got Katie on the podcast as probably one of the best-placed people in the country to actually explain to us the nuts and bolts of how health insurance works.

For a more detailed guide, we’ve also written up all you need to know on health insurance.

Dr Tryon explained on the podcast that the biggest area of growth that Vitality is seeing with regard to its health cover is thanks to the deficiencies of NHS primary care (i.e. GPs) – the exact issue my family and I face routinely. Our problems are being mirrored up and down the land and this is driving people to spend money, regardless of the sunk cost of their tax.

But they’re not buying insurance instead. And this is costing us, collectively, billions every year.

My challenge here then, is how do we solve the clear issue of a lack of coverage? While I still don’t feel as if my family is at the point of taking the leap, what is clear is we’re collectively as a nation spending a lot of money on health treatments that could potentially be covered more affordably by the pooling power of the insurance market.

My worry is that it is a mindset issue. We eulogise the NHS. For many reasons this is perfectly fair given the nature of the institution and the impact it has on many of our lives.

Personally, I have seen the NHS at its best with the birth of my son. It was truly remarkable. Enough to make me clap on a Thursday evening. But I have also had a good look at it at its worst, particularly with what I went through with my mother many years ago.

Private healthcare is so often the bogeyman in arguments about how the NHS works and is funded. It is seen as the evil vulture capitalist in the room looking to ruin nationalised health from under our noses. But the mad thing is, while we argue over this, in the breach it is creating a coverage gap that is just making us poorer and less healthy.

It’s time we thought again about how to ensure everyone has their healthcare needs covered – through a combination of national and private health that doesn’t rely on judgement, just beneficial outcomes.

Photo Credits: Pexels

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Health insurance can seem daunting, but it’s a potential alternative, or complementary way, to manage your own health and access timely treatment as the NHS faces historic issues.

It is safe to say health insurance is not a widely used product in the UK. Just 2.6% of health spending is done via private medical insurance according to the Office for National Statistics.

But it is gaining some traction – especially given well-documented recent issues in the NHS. While waiting lists are falling, more than seven million are still holding on for procedures.

The UK’s healthcare system is still overwhelmingly nationalised. In practice, this means that the NHS is ‘free at the point of delivery’– but is ultimately paid for through everyone’s taxes. You can read editor Edmund Greaves’s weekly column for more on that.

That being said, a private healthcare system, although much smaller, does exist alongside the national provision.

The lines between private and public are at times blurred as some doctors and healthcare institutions look after both kinds of patient. But how that care is funded is ultimately what is relevant.

This guide explains what health insurance is, how it works, why it might be a useful or necessary alternative to the NHS, what to consider when purchasing and its potential role in your finances.

In compiling this guide, Mouthy Money spoke to Dr Katie Tryon, chief commercial officer at health insurer Vitality for an episode of the Mouthy Money podcast. You can listen to the full podcast episode with Katie to hear more about how health insurance works and what to consider.

What is health insurance?

Health insurance, commonly known as private medical insurance in the UK, is a form of insurance policy that funds private healthcare for specific medical conditions, treatments or other health-related services.

Unlike the NHS, which offers free care at the point of use, private health insurance grants access to private hospitals, consultants and treatments. These private services are typically much quicker than NHS care but there is a significant ‘out-of-pocket’ cost attached.

Private health insurance generally covers acute conditions, such as sudden illnesses or injuries requiring surgery, but often excludes chronic conditions like diabetes or long-term care. Policies differ, but many include hospital stays, specialist consultations, diagnostic tests and treatments like physiotherapy.

Dr Tryon explains: “Traditional health insurance covers private treatment for conditions like musculoskeletal issues, cancer, or cardiovascular problems, depending on policy terms. These are the big-ticket items people historically bought insurance for.”

But she notes that usage of so-called ‘primary’ services such as GPs is growing significantly in response to changes in NHS ease of access.

“The real growth has been in primary care – services like GP consultations, physiotherapy, talking therapies and even skin analytics. Since we launched our GP service in 2015, claims in this area have grown by hundreds of percent.

“Moving further upstream, prevention is a growing focus. We use tools like Apple Watches to encourage physical activity, better nutrition, smoking cessation, weight loss and regular screenings. Health insurance has evolved from just paying hospital bills to a holistic tool for managing and improving health.”

As Dr Tryon says, some plans provide additional benefits, such as holistic services, tech, dental cover or mental health support, depending on the provider and premium.

This is typically done as it is an effective way to ensure the customer remains healthy for longer and also doesn’t end up costing the insurer more in expensive health treatments down the line.

More from Edmund Greaves

How does health insurance work?

When you buy a health insurance policy, you pay a monthly or annual premium to an insurer, who agrees to cover eligible medical costs for private treatment.

The process begins with selecting a policy that matches your needs, budget and desired coverage level. Such cover ranges from basic plans for major treatments to comprehensive ones that include outpatient care and extra services.

If you need treatment, you contact the insurer, who may require pre-approval or allow a GP referral to a private specialist.

The insurer verifies if the treatment is covered, and if approved, you can book appointments at a private hospital or clinic within the insurer’s network. Typically, the insurer pays the provider directly, though some policies require you to pay upfront and claim reimbursement.

Premiums vary based on age, health, lifestyle and coverage. They may increase annually due to inflation or aging, depending on the terms and conditions of the policy.

Policies often have exclusions, like pre-existing conditions or cosmetic procedures, and may include excess fees, where you cover part of the costs. Reading the terms carefully ensures you understand the coverage.

Why might you want or need health insurance?

Health insurance can offer some advantages depending on your situation. The NHS provides excellent emergency care and chronic condition management, but waiting times for non-emergency procedures, like knee surgery, can extend to months.

Dr Tryon is emphatic that health insurance is just about non-emergency procedures and issues but is increasingly being used an alternative for primary care.

“Our data shows a clear correlation between NHS waiting lists and our claims, especially for secondary care like hospital treatments. Primary care and prevention services are areas the public sector struggles to prioritise due to financial constraints.

“Another is the ‘quantified self’ movement. People are obsessed with data – heart rate variability, steps, calories – but often don’t know what to do with it. They’re looking for guidance and we help navigate that. Early intervention is also key. It’s cheaper and better to address issues early, like physiotherapy instead of a hip replacement.

“Finally, the digital revolution, supercharged by Covid, has transformed care delivery. Virtual services and community-based care leapt forward, enabling this shift.”

Private insurance can enable quicker treatment, which is vital if you’re in pain or need to resume work. It can also provide greater choice (depending on what is available in your area) allowing you to select your consultant, hospital and appointment times, offering flexibility the NHS may not.

Private hospitals can provide private rooms and better facilities, giving more comfort during recovery. For the self-employed or those unable to take extended time off, private care can minimise income loss by speeding up recovery.

Access to specialists or advanced treatments may also be easier privately, especially for complex conditions.

What to look out for when buying?

Choosing the right health insurance policy requires careful consideration to ensure it fits your needs and budget.

It is important to remember too that health insurance only works if you have a policy in place before a condition or issue emerges.

Dr Tryon says many policies are provided through workplace programs, but you can take out a policy independently. Costs vary between £70 to £200 (but can be more) depending on your age and health-related factors.

Here are some key things to consider:

Coverage scope: Check what the policy includes. Basic plans may cover only inpatient treatments, while comprehensive ones include outpatient consultations, diagnostics, and therapies. Ensure it matches your priorities.

Exclusions and limits: Most policies exclude pre-existing conditions, cosmetic surgery, or chronic illnesses. Some limit coverage for treatments like cancer care. Review the terms to avoid unexpected gaps.

Network of providers: Insurers partner with specific hospitals and consultants. Check that nearby facilities are included and available with your chosen provider.

Excess and co-payments: Some policies require an excess, like £100 per claim, or a percentage of costs, reducing premiums but increasing your out-of-pocket expenses.

Premium costs: Compare quotes from multiple providers, but don’t compromise essential coverage for a lower price. Use comparison sites or brokers for broader options.

Claims process: Choose insurers with a clear claims process and strong customer service. Look at reviews to consider the firm’s reliability.

Consider your age, health and finances when selecting a policy. Younger, healthier individuals might opt for basic cover, while older people or those with health concerns may need broader protection.

Why health insurance matters for your finances

Health insurance isn’t typically defined as something that can save you money or offer a sensible financial safety net, but its usefulness does extend beyond healthcare.

By protecting your health and potentially your family’s too, it can act as a financial safeguard that protects you against a loss of income, savings and stability through health issues.

For self-employed individuals or those trying to navigate long NHS waiting times, it can enable faster recovery times and outcomes.

Premiums, while highly variable depending on your age and health status, are predictable, unlike ‘out-of-pocket’ medical bills that can reach into the thousands.

However, the costs, often hundreds or thousands annually, require weighing against benefits, especially if you’re young, healthy, or rarely need care. For some, saving for emergencies may be more cost-effective.

Private insurance becomes more appealing for those who can afford it. It complements the NHS, easing the pressure on you to rely on public services while enhancing your healthcare options.

If you’re thinking about getting health insurance, assess your health and finances and consider consulting a financial planner or broker to find the best policy.

Understanding health insurance’s role in your financial plan can help you to make choices that support your health and wealth.

Photo credits: Pexels

The post A guide to health insurance in the UK appeared first on Mouthy Money.

The decision reflects a delicate balance act the central bank is facing between curbing inflation and supporting growth.

Three members dissented, voting for a rate cut citing a softening labour market and subdued consumer demand.

The MPC noted that underlying UK GDP growth remains weak, while the labour market is ‘loosening’ – i.e. more people are losing jobs.

Consumer Price Index (CPI) inflation is expected to peak at 3.7% in September before stabilising just below 3.5% by the end of 2025.

More from Edmund Greaves

Uncertain picture for household finances

The Bank’s most recent decision is taken against a persistently unclear outlook for households to plan against.

Most watchers believe it will cut its rate to 4% in August, eventually reaching 3.5% some time next year. But the MPC has taken a ‘two steps forward, one step back’ approach for some time, disappointing mortgage holders in particular.

Nicholas Hyett, investment manager at Wealth Club explains why the situation is so complicated: “The Bank of England’s goal over the last two years has been to slowly bring down inflation without crashing the economy – achieving a so-called soft landing, that’s not easy at the best of times let alone when the economic data is unreliable.

“Official data suggests the Bank has so far done a pretty good job, with the UK labour market holding up well. The problem is that data has never been more unreliable, and elsewhere there are signs of strain. Just this morning recruiter Hays said that it is experiencing significant weakness, with a 13% revenue fall in UK & Ireland as hiring for permanent positions softens.

“Inflation numbers too are subject to uncertainty and had to be restated last month after an error in the data. Conflict in the Middle East risks higher energy prices potentially pushing inflation higher – though calling the course of events there is almost certainly a mugs game, and the Bank has said that under current conditions it expects inflation to remain broadly at current levels for the rest of the year.

“The risk is that all the uncertainty leaves the Bank paralysed, with rates stuck at their current level. With uncertain data, policy setters will need a really compelling reason to hike or cut interest rates and that could result in default driven decisions.”

Photo credits: pexels

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In this episode of Planner Unplugged, Mouthy Money’s Edmund Greaves speaks to Simon Harvey, Managing Director of bdhSterling – a financial planning firm that helps people manage their money between the UK and Australia.

Simon shares how he got into financial planning, what it’s like helping clients who move between countries and why your location can seriously affect your financial choices.

If you’ve ever wondered how expats handle pensions, tax, or investments, this one’s for you.

They also dig into how tech is changing the way we get financial advice, why so many people still struggle to access it, and what really matters when choosing a planner.

Simon offers useful tips for anyone thinking about a career in finance – and explains why helping people reach their goals is what makes the job worth it.

The post Planner Unplugged – Simon Harvey appeared first on Mouthy Money.

Host Edmund Greaves chats with Marlene, founder of UNIQ Family Wealth, about her unconventional journey into financial planning and what keeps her passionate about the job decades later.

They dig into why understanding clients as people, not just portfolios, is key – and how the human side of money is often the most overlooked. Marlene also shares her thoughts on the growing role of tech and regulation in shaping the industry, and why lifelong learning is non-negotiable in a world where everything’s changing fast.

She’s also the author of Boomers: Redefining Retirement and Cascading Your Wealth, and brings a wealth (pun intended) of insight into how planners can better serve clients through life’s big transitions.

The post Planner Unplugged – Marlene Outrim appeared first on Mouthy Money.

The UK economy showed 0.3% contraction in April on the back of global tariff wars, National Insurance and minimum wage hikes.

GDP fell 0.3% in April according to the Office for National Statistics (ONS).

The biggest detractor to economic growth was a decline in production, which fell 0.6%, while services were down 0.4%.

One bright spot was construction, which saw a 0.9% increase.

Liz McKeown, director of economic statistics and the ONS commented: “The economy contracted in April, with services and manufacturing both falling. However, over the last three months as a whole, GDP still grew, with signs that some activity may have been brought forward from April to earlier in the year.

“Both legal and real estate firms fared badly in April, following a sharp increase in house sales in March when buyers rushed to complete purchases ahead of changes to stamp duty. Car manufacturing also performed poorly after growing in the first quarter of the year.

“In contrast April was a strong month for construction, research and development and retail, with increases in these only partially offsetting falls elsewhere.”

More from Edmund Greaves

What does this mean for my finances?

The fall, while only short term, reflects increasing struggles in the economy as a wave of policies and global events hamper business confidence and planning.

Tax increase alongside higher staffing costs driven by minimum wage increase have impacted on economic performance.

While this is bad news in the round, it could presage more interest rate cuts by the Bank of England as it looks to help support the economy in a tough spot.

Alice Haine, personal finance analyst at online investment platform Bestinvest by Evelyn Partners, says for households “a contracting economy will be concerning.”

She add: “Lacklustre economic growth can have dire consequences for people’s finances if earnings stagnate and redundancies ramp up as companies focus on reducing costs rather than investing in expansion and new hires.

“That trend is already evident in the latest jobs data with unemployment on the rise, vacancies continuing to fall and private sector wage growth easing back. 

“Pair a softening labour market and slowing pay growth with an uptick in inflation in April and a creeping tax burden and household finances may start to feel the squeeze once again. 

“There are some glimmers of hope, however. Borrowing costs have eased from their peak thanks to four interest rate cuts since last August and energy costs are set to drop from July 1 though they will remain 10% higher than the summer of 2024.

“These factors will relieve some of the pain for consumers but with inflationary pressures still lingering, the Bank of England is expected to keep the headline interest rate on hold at 4.25% at its rate-setting meeting next week.”

Haine has some guidance for anyone concerned by how the situation could affect their financial security.

“Many household budgets are still grappling with the horrible hangover left by the cost-of-living crisis,” she says, “which is why getting a grip on personal finances as disposable incomes get hit by elevated prices once again and the longstanding freeze to personal tax thresholds is imperative.

“Whether it’s tackling troublesome debts, setting aside some financial reserves or polishing up a CV, consumers would be wise to get their financial affairs in order to protect against any sudden shocks, such as job loss.”

Photo credits: Pexels

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Chancellor Rachel Reeves delivered her major spending review yesterday. Needless to say the reaction (and speculation beforehand) was a deeply mixed bag.

For all the talk of spending here, investment there and tough decisions there was little for normal people to take from the announcements – a veritable storm in the media teacup which frenzied itself up ahead of the day.

The reason it contained nothing of interest for us normals is that it wasn’t a ‘fiscal event’. The Chancellor – in other words – didn’t change any tax rates or give away any new baubles.

Even the experts seemed a bit baffled by the whole thing.

But it has landed at a time when the economic clouds are beginning to gather in earnest.

Numbers going the wrong way

Labour have been very quick to defend the economic picture, but it is undoubtedly gloomy.

In the past 12 months 250,000 people are no longer on employer payrolls (a proxy for unemployment figures that are broken at the moment).

Interest rates have come down a bit – but thanks to inflation ticking back up close to 4% it is questionable how much more they can shift lower sustainably.

GDP has taken a big hit – figures out today show a 0.3% fall. Although these are largely statistical noise there is a case to be made that National Insurance hikes, minimum wage increases and other effects in April are putting a lot of pressure on the economy.

And this is what we’ve got at the moment, the perfect storm in a teacup of our times. We sit and watch a load of noise on what is going on in the economy, while the rest of us just try and get by, our wallets feeling tighter by the day.

Because I don’t know about you, but things feel tight for me at the moment and I’m meant to be fucking financial whizz. Times are hard and they aren’t getting better. We’ve cut tons of our discretionary spending and it still feels like not enough.

If this is being replicated up and down the land then the country is in real trouble.

The unemployment is what worries me the most (and I am sure worries Whitehall the most). History tells us when large numbers of people find themselves out of work, angry and disenfranchised – that is the moment when the nation is in greatest peril.

I pray for better days to come.

Photo credits: Flickr

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This week, we speak to industry veteran and protection expert Roy Mcloughlin.

In this episode of Planner Unplugged, host Edmund Greaves speaks with financial services veteran and host of the new podcast Mañana Roy Mcloughlin.

They explore Roy’s extensive career, the value of collaboration and the importance of breaking down silos within the industry.

Roy offers insights into financial regulation changes, the growing role of technology and AI, and the urgent need for better training and recruitment of young financial planners. 

The conversation also reflects on the rewarding nature of client relationships and the need for the industry to evolve in order to meet changing expectations.

For the Mañana Podcast here.

The post Planner Unplugged – Roy Mcloughlin appeared first on Mouthy Money.

If I had to consider the biggest question facing my pension, what would it be?

Is it invested right? Am I contributing enough? Should I consolidate my pots?

These are all reasonable questions.

But no, the biggest question I have for my pension is ultimately – will it be enough? And how do I even work out what enough is?

Fortunately, the Pensions and Lifetime Savings Association (PLSA) has answers. So let’s go on a pension savings journey.

Age is just a number

I am 36 years old. I work a desk job, so assuming my brain (and fingers) hold up I could have a career that spans another 30 years easily.

Now, I started work in 2012, but I only opened my first pension in 2016. In the intervening period, I’ve accrued just over £34,000 into my overall pot.

Finding this number actually surprised me, I had thought it would be lower (especially considering this year’s market shenanigans).

So back to my question – is that enough? Turns out I might need that pension to be worth just under £1 million to retire on. Uh oh.

Retirement living standards

The PLSA compiles generalised figures for what it constitutes as either minimum, moderate or comfortable retirement income standards.

It released the latest iteration this week.

For the purposes of this thought experiment, let’s go for the middle ground option here. For what the PLSA calls a moderate retirement in 2025 I would need to be able to generate around £32,000 in income each year. This excludes housing costs and assumes you own your home without a mortgage (I do, fortunately for me).

If you include the full state pension at just shy of £12,000 a year then your pension would have to generate around £20,000 a year in income.

To do this you would need a pot of around £510,000 (based on drawing down 3.5%) a year – in today’s money.

This is well and good, but these are figures for someone retiring TODAY.

So what about me, in 30 years?

To save you the complicated further sums, I’ve worked out I’ll need a pension of just over £925,000 just to achieve a moderate income of £58,000 (assuming 30 years of average 2% inflation) in 2065.

More from Edmund Greaves

Confounding factors

There are some confounding factors here to be aware of:

• Being married reduces the per-person income requirements. I am fortunately married and my wife is younger than me by three years so hopefully that persists as it would make the target pot size smaller.
• State pension will likely not kick in for me until I turn 70 which means I have to front load some of my income depending on when I retire.
• I’ve assumed the state pension will still even exist (lol).
• I haven’t accounted for things like tax-free lump sum.
• Nor have I accounted for future tax changes.
• I’ve made a bunch of general assumptions about inflation that might prove optimistic (too low) in time.
• I haven’t accounted for my other assets which might generate a future income or windfall, such as my home or my Lifetime ISA.

Before things get boring the point here is that pensions are very complicated.

This is what I chatted to Clare Moffat about on this week’s podcast. I asked Clare to share the most common pension questions she gets in her work as a tax and pensions expert at mutual insurer Royal London.

In short, people are grappling with even the most basic aspects of their pension – before we get into the mad stuff like Money Purchase Annual Allowance (MPAA) and all that jazz.

I’ve never finished a conversation feeling more like I needed some actual financial advice to make it happen.

But I still haven’t answered my original question – is it enough?

To hit that fabled £925,000 pot – I’d need my current contributions and pot to return just under 9% per year. That’s pretty ambitious. Or is it?

I’m mostly invested in global index trackers – including Fidelity Index World. This fund has returned 8.81% over five years.

Including investing charges and pension pot charges I’m likely to fall a bit short. But boy, it is closer than I thought it might be.

Photo credits: Pexels

The post To have a “moderate” income in retirement I need a million-pound pension pot appeared first on Mouthy Money.

Income protection insurance can provide a potentially vital financial safety net for families, yet it remains widely misunderstood or overlooked by many.

With rising living costs and economic uncertainty, safeguarding your income against unforeseen circumstances is more important than ever.

Let’s look at what income protection insurance is, why you might need it, when you might not, plus the key considerations when shopping for a policy.

Income protection explained

Income protection insurance is a policy designed to provide a regular income if you’re unable to work due to illness, injury, or disability.

Unlike other forms of ‘protection’ insurance, such as life insurance or critical illness cover, income protection focuses on replacing a portion of your earnings over an extended period, helping you maintain your lifestyle and meet financial commitments.

The way it works is straightforward. You pay a monthly premium to an insurer, and in return, the policy pays out a tax-free monthly sum – typically 50-70% of your pre-tax income – if you’re unable to work for a specified period.

Policies often have a waiting (or deferral) period, which can range from a few weeks to several months, during which you must be unable to work before payments begin. This waiting period can be tailored to your circumstances, with shorter periods generally leading to higher premiums.

Payments continue until you’re able to return to work, the policy term ends, or you reach retirement age, depending on the policy’s terms.

Some policies also offer additional benefits, such as rehabilitation support to help you return to work or cover for specific conditions like back injuries or mental health issues.

Income protection is particularly valuable for those whose financial stability depends on their ability to earn, offering peace of mind that bills, mortgages and daily expenses can still be covered during difficult times.

More from Edmund Greaves

Why you might need income protection

The primary reason to consider income protection is the risk of serious illness or injury that prevents you from earning an income.

In the UK, millions of people face long-term health challenges that disrupt their ability to work. Over 2.8 million people were economically inactive due to long-term sickness in 2024, according to the Office for National Statistics (ONS), a figure that highlights the vulnerability of relying solely on personal savings or statutory benefits.

Serious illnesses, such as cancer, heart disease, or mental health conditions, can strike unexpectedly, often requiring extended recovery periods.

Similarly, accidents – whether a car crash or a workplace injury – can lead to temporary or permanent disability, cutting off your income stream.

Statutory Sick Pay (SSP) in the UK provides only £118.75 per week (as of 2025) for up to 28 weeks, which is unlikely to cover most people’s living expenses, especially if you have a mortgage, rent, or dependents.

 Savings can quickly dwindle and benefits such as Universal Credit may not bridge the gap adequately. Income protection can provide a more substantial, reliable income, allowing you to focus on recovery without the added stress of financial hardship.

Self-employed individuals are particularly at risk, as they lack access to employer-provided sick pay. Freelancers, contractors, and small business owners often face immediate financial strain if they’re unable to work.

Even salaried employees may find their employer’s sick pay scheme, typically a few months at full or half pay, insufficient for prolonged absences.

Beyond health-related risks, income protection can also be a lifeline for those with significant financial commitments, such as young families or individuals with large mortgages. Losing your income could jeopardise family stability, making income protection an essential consideration for parents.

Reasons why you wouldn’t need it

While income protection is valuable for many, it’s not necessary for everyone. Certain circumstances may reduce or eliminate the need for a personal policy.

If you’re employed and benefit from a robust workplace protection scheme, you may already have adequate cover. Some employers offer generous sick pay packages, covering full or partial salary for extended periods, or provide group income protection schemes as part of their benefits package.

These policies, often cheaper due to collective bargaining, may make a personal policy redundant. However, it’s crucial to review the terms. Some schemes only cover specific conditions or have shorter payout periods.

Individuals with substantial savings or alternative income sources may also forgo income protection. For example, if you have enough in savings to cover living expenses for several years, or if you have passive income from investments, rental properties, or a pension, you may not need the additional security of a policy.

Similarly, those with a partner or family member who can fully support household finances during a period of illness might feel less urgency to purchase cover.

People nearing retirement or with no dependents may also find income protection less relevant. If you’re close to receiving a pension or have paid off major debts like a mortgage, the financial impact of losing your income may be minimal. Additionally, some policies don’t cover individuals over a certain age, typically 65, which aligns with retirement for many.

Finally, if you work in a low-risk profession and have excellent health, you might perceive the risk of needing income protection as low. However, this assumption itself carries risks, as unexpected illnesses or accidents can affect anyone, regardless of lifestyle or occupation.

Things to look out for when buying a policy

Choosing the right income protection policy requires careful consideration to ensure it meets your needs and offers value for money.

Here are key factors to keep in mind:

Shop around: Premiums and policy terms vary widely between insurers. Use comparison websites or work with a broker to explore options from multiple providers. Look at the percentage of income covered, the deferral period, and any additional benefits, such as rehabilitation support or premium waivers during unemployment.

Consider speaking to an adviser: An independent financial adviser can help you navigate the complexities of income protection options, ensuring the policy aligns with your financial situation and goals.

Understand exclusions and eligibility: Insurers may exclude pre-existing medical conditions, mental health issues, or high-risk occupations (e.g., construction or professional sports). Disclose your full medical history and job details to avoid having claims denied later. Some conditions, like chronic illnesses, may preclude you from getting cover or increase premiums.

Check policy flexibility: Ensure the policy allows adjustments, such as changing the deferral period or coverage amount, as your circumstances evolve. Also, check whether premiums are guaranteed (fixed) or reviewable (subject to change), as this can affect the long-term affordability of the policy.

Cost vs. coverage: While cheaper policies may seem appealing, they often come with shorter payout periods or stricter terms. Balance affordability with comprehensive cover and explore policies with back-to-work support to reduce long-term costs.

In conclusion, income protection insurance is a crucial consideration for many in the UK, particularly those with dependents, significant debts, or no alternative financial safety net.

By understanding how it works, assessing your need, and carefully selecting a policy, you can protect your financial future against the unpredictability of illness or injury.

Always consult with professionals if you’re in any doubt and compare options to find a policy that offers both security and peace of mind.

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