How much income protection insurance do I need? The figure comes from a short sum, not a rule of thumb: add up what has to be paid every month, take away the money that keeps arriving while you are off sick, and check the result against the most an insurer will pay, which insurers cap, usually at a share of your income rather than all of it. Each step below uses the insurers' and government's own figures, and none gives an amount for you.
To see that sum priced against actual policies for your job, income and health, a few details in the enquiry box here are enough for an FCA-authorised broker to phone back and talk it over, at no charge.
How much of your income can income protection pay out?
MoneyHelper's guide (archived September 2026) says income protection "typically pays out between 50% and 65% of your income if you’re unable to work". It is a description, not a limit: each insurer sets its own ceiling. In the policy documents from Legal & General, Zurich, Scottish Widows, Royal London and LV=, the share allowed on the first band of income is 60% or 65%, and most then drop to 45% or 50% above £60,000 or £70,000, with an overall cap on top. Aviva's Living Costs Protection is built differently: the benefit is a set monthly amount, anywhere from £500 to £1,500, which its page says can cover as much as 90% of take-home pay.
Each insurer's limit and cap, document by document, is in the income protection comparison, and what a policy is and when it pays is in what income protection is and how it works. The benefit you buy can sit below the ceiling; Legal & General's April 2025 terms, published on its adviser site, put it as "You can choose any monthly benefit amount up to this maximum".
Buying more than the ceiling allows is the risk the documents warn about, because the limit is applied again at a claim, to income at that time. Royal London's adviser-sold Personal Menu Plan, in its July 2026 plan details, warns "If your income has dropped since your policy started you may find the amount we pay you is less than the amount of cover you are paying for", and Scottish Widows' policy summary (September 2025) says "We won’t refund any premiums if you have paid for more cover than your claim allows".
What counts as income if you are employed or self-employed?
The ceiling is applied to a measured figure, which is not always the number on your contract. For employees, Legal & General's terms say "Your income includes your earnings before tax, any bonuses or commission and the value of any taxable benefits", checked against payslips or HMRC documents such as a P60. Zurich's key features (April 2026) add that gross income "includes benefits in kind (that would stop if you become unable to work) and dividends you get", while LV='s policy summary (April 2026) counts earned income before tax, leaving out "any income from savings or investments".
For the self-employed the measure is profit. The same Legal & General terms count your share of the business's yearly taxable profits, leaving out running expenses that HMRC guidance allows, and average the three years before incapacity if you have been self-employed that long; under twelve months of self-employment at a claim limits the monthly benefit to 35% of yearly earnings, and tax returns or business accounts are asked for. Zurich may average the last 36 months for a director or the self-employed, and Scottish Widows bases a self-employed claim on the previous 36 months of business income. How cover is arranged for the self-employed is in income protection for the self-employed, and for limited-company contractors in income protection for contractors.
How do you work out your essential outgoings?
Start from the bills that must be paid whatever happens, not from your pay. MoneyHelper's guide to budgeting on an irregular income (archived June 2026) lists the regular outgoings to include: rent or mortgage, travel costs, mobile phone, electricity and gas, insurance, Council Tax and food, adding "don’t worry if you can’t account for every last penny". Its Budget planner (archived October 2026) suggests checking against bank statements or a banking app, and entering a yearly amount for any cost that varies. Aviva's page makes the same point from an insurer's side: work out what your most important monthly bills cost and aim to cover those.
Compare that total with the benefit itself, not with gross pay. Zurich's and LV='s ceilings are worked out on income before tax, as is Legal & General's, whose terms add "You don’t have to pay tax on your monthly benefit payments", while your bills are paid from what is left after tax.
How do sick pay and state benefits change the amount?
Money that carries on during a claim can lower the payment, and it can fill the gap before one starts. HMRC's employer rates page sets Statutory Sick Pay for 2026 to 2027 at £123.25 a week or 80% of average weekly earnings, whichever is lower. GOV.UK's SSP guide adds that it lasts up to 28 weeks, that you must "be classed as an employee", and that a company sick pay scheme can pay more than the statutory amount, so check your contract.
Insurers treat these sources differently, which is why the sum needs each policy's wording. Legal & General counts 60% of any pre-tax income from an employer, such as sick pay, as continuing income and takes it off, but does not deduct state benefits (naming contributory ESA and SSP) or count savings income, and it warns that its payment "might affect your claim for some means-tested state benefits". Zurich lists "sick pay" among the continuing income it deducts, taking off only the net amount of taxable income, and does not take account of state benefits or of savings and investment income. Other insurers set their own rules on this, so ask about each; a public-sector example is in income protection for NHS staff.
When SSP ends, New Style Employment and Support Allowance may follow. GOV.UK's guide says it cannot be paid while you get SSP from an employer, though you can apply up to 3 months before SSP ends. As a contributory benefit it rests on the National Insurance you have paid or been credited with, usually over the last 2 to 3 years, and employed and self-employed people can both claim. An assessment rate normally applies for the first 13 weeks; after assessment, the 2026 to 2027 rates are £95.55 a week at most in the work-related activity group and £145.90 at most in the support group. Savings do not reduce New Style ESA, but a private pension paying more than £85 a week does.
Your outgoings total, sick pay and benefits can be checked against the wording of particular policies by a broker; that call-back is requested with the same form on this page, at no charge.
How should the deferred period line up with sick pay and savings?
The deferred period is the number of weeks before payments start, so it decides which costs your own money must meet. MoneyHelper gives the most common waits as 4, 13, 26 weeks and a year, while Zurich's key features list 4, 8, 13, 26, 52 or 104 weeks and ask you to "think about any earnings you expect to get". Scottish Widows gives the example of a wait chosen to "coincide with when any sick pay paid to you by your employer stops". What a longer wait does to the premium is in what income protection costs.
Savings play a different part from sick pay. Neither Legal & General nor Zurich deducts savings from a payment, so savings do not shrink a claim, but they are what pays the bills while you wait. MoneyHelper's irregular-income guide says "It’s good to have three months’ essential outgoings available", and its income protection page warns that savings "might need to last a long time".
If the main bill is a mortgage, income protection for a mortgage compares this cover with mortgage protection; losing a job rather than falling ill is dealt with in whether it covers redundancy.
How does the sum work for one invented employee?
Our working, dated 20 October 2026, uses an invented employee, not a typical person and not a suggested amount. The income and bills are made up; the 60% ceiling is the first-band share in the Legal & General, Scottish Widows and LV= documents above, and the sick pay is the 2026 to 2027 SSP rate. This employee earns £36,000 a year before tax, and the employer pays only SSP.
| Step | Working | Result |
|---|---|---|
| Ceiling at 60% of income | 60% x £36,000 = £21,600 a year; divided by 12 | £1,800 a month |
| Essential outgoings | Rent £750, Council Tax £150, energy £120, food £300, travel £100, phone £30, insurance £50 | £1,500 a month |
| Outgoings against the ceiling | £1,800 - £1,500 | £300 a month of room under the ceiling |
| SSP as a monthly figure | £123.25 x 52 / 12 | £534.08 a month, for up to 28 weeks |
| Gap after SSP alone | £1,500 - £534.08 | £965.92 a month |
| Outgoings across the wait | £1,500 x 3 for 13 weeks; £1,500 x 6 for 26 weeks | £4,500 or £9,000 |
The result has two parts: monthly outgoings to set against the ceiling, and a sum to carry you through the wait, part of which SSP meets. It leaves out tax on SSP, what a particular insurer would deduct, and the premium, each of which changes the answer. Send your own figures with the enquiry form and the broker who rings you back can price two different waits on the same cover, so the trade-off shows in pounds.
Frequently asked questions
How is the amount of income protection calculated?
Legal & General's terms pay the lower of two figures: the benefit worked out from your income when you became incapacitated, less continuing income, and the monthly benefit on your policy schedule.
Is there an income protection calculator?
The arithmetic above is the calculation: outgoings, offsets, then the insurer's ceiling. A quote also reflects things the sum does not use, such as your job, health and chosen wait, which the cost page sets out.
Does income protection pay more than sick pay?
That depends on your employer's scheme and the policy. SSP is up to £123.25 a week for up to 28 weeks and a company scheme can pay more; the two insurers above each describe how employer sick pay is taken off a payment.
Where do life insurance and critical illness cover fit?
They answer different questions: see whether you need both life insurance and income protection, how much life cover and how much critical illness cover, or the critical illness and income guides.
Sources
- Legal & General, Income Protection Benefit Policy Terms and Conditions (QGI12745 04/25; adviser section of its site), read 20 October 2026. legalandgeneral.com
- Zurich, Terms and conditions of the Zurich Income Protection policy (PWL850002003 04/26; sold through advisers), read 20 October 2026. zurichintermediary.co.uk
- Zurich, Key Features of the Zurich Income Protection Policy (PWL850001003 04/26; sold through advisers), read 20 October 2026. zurichintermediary.co.uk
- Scottish Widows, Protect Income Protection Cover policy summary (61218 09/25; adviser site), read 20 October 2026. adviser.scottishwidows.co.uk
- Royal London, Plan details for The Personal Menu Plan Income Protection (July 2026 edition; available through advisers), read 20 October 2026. royallondon.com
- LV=, Income Protection Guaranteed Premiums Policy Summary (49025-2022 04/26), read 20 October 2026. lv.com
- Aviva, Income protection insurance (web page, undated), read 20 October 2026. aviva.co.uk
- GOV.UK, Rates and thresholds for employers 2026 to 2027, read 20 October 2026. gov.uk
- GOV.UK, Statutory Sick Pay (SSP), read 20 October 2026. gov.uk
- GOV.UK, Employment and Support Allowance (ESA), read 20 October 2026. gov.uk
- GOV.UK, New Style Employment and Support Allowance, read 20 October 2026. gov.uk
- Department for Work and Pensions (GOV.UK), Benefit and pension rates 2026 to 2027, read 20 October 2026. assets.publishing.service.gov.uk
- MoneyHelper (archived 24 September 2026), What is income protection insurance?, read 20 October 2026. web.archive.org
- MoneyHelper (archived 5 June 2026), How to budget for an irregular income, read 20 October 2026. web.archive.org
- MoneyHelper (archived 7 October 2026), Budget planner, read 20 October 2026. web.archive.org
- This site's own working for the hypothetical employee, calculated 20 October 2026 (arithmetic from the figures above; no external source).