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Income Protection · 6 min read

How much income protection do I need?

Four numbers decide your policy: the benefit, the deferment period, the term and the definition. Here's how to set each one from your own figures rather than a rule of thumb.

Last updated: August 2026

The method in one line

Essential monthly outgoings − income that would continue = the benefit you need. Then set the deferment period to the point your other income runs out, run the term to retirement, and insist on an own-occupation definition.

Step 1 — Total your essential outgoings

Insure the bills, not the salary. Work through a bank statement and total what genuinely has to be paid every month if you were signed off tomorrow:

  • Mortgage or rent, plus service charge and ground rent
  • Council tax, energy, water, broadband, phone
  • Food, fuel or fares, and any essential travel
  • Childcare or care costs that would continue
  • Loan, car finance and credit card minimum payments
  • Insurance premiums, including this policy

Leave out holidays, subscriptions and discretionary saving. Those are the things that flex during a claim, and including them inflates the premium for cover you would not miss.

Step 2 — Subtract income that would continue

  • A partner's earnings, to the extent the household could rely on them
  • Group income protection through your employer, if you have it — check the percentage and how long it pays
  • Rental or investment income that does not depend on you working
  • Existing personal cover already in force

What is left is the monthly shortfall. That figure — not 70% of your salary — is the benefit to aim for, subject to the insurer's cap.

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Step 3 — Set the deferment period

Find the point at which your other income stops, and start the policy there. Two figures give you the answer:

  1. Employer sick pay. Your contract states how many weeks at full pay and how many at half pay. Add them.
  2. Savings runway. Divide your accessible savings by your essential monthly outgoings to get the months your reserves would cover.

Add the two together and pick the nearest deferment option below that total. Choosing a shorter deferment than you need costs money for cover you would not use; choosing a longer one than you can fund leaves an unfunded gap at the worst possible time.

Step 4 — Set the term and the definition

Run the term to your expected retirement age. The point of the product is the claim that never ends, and a term finishing at 55 leaves your final working decade — statistically the likeliest years for a long-term health claim — uninsured.

Insist on an own-occupation definition of incapacity, which pays if you cannot do your own job rather than any job at all. If affordability is tight, reduce the benefit or extend the deferment before you compromise on this — a cheap policy with an any-occupation definition can be very hard to claim on.

Worked examples

Employed — Priya, 34
  • Salary £38,000 (£2,470 net a month)
  • Essential outgoings: £1,750
  • Continuing income: none — single, no group scheme
  • Benefit needed: £1,750/month
  • Sick pay: 8 weeks full, 8 weeks half
  • Savings: £4,000, about 2.5 months of outgoings
  • Deferment: 26 weeks
  • Term to 67, own occupation, indexed
Self-employed — Tom, 45
  • Average profits £55,000 over 3 years
  • Essential outgoings: £2,900
  • Continuing income: £600 partner contribution
  • Benefit needed: £2,300/month
  • Sick pay: none
  • Savings: £6,000, about 2 months
  • Deferment: 8 weeks
  • Term to 65, own occupation, guaranteed premiums

Both figures sit inside the usual 50–70% cap on pre-tax earnings, so both are insurable as calculated. Where your shortfall exceeds the cap, insure to the cap and close the remaining gap by reducing outgoings or holding a larger cash reserve.

Common sizing mistakes

  • Insuring gross salary. Benefits from a personal policy are tax-free, so replacing your gross pay overshoots — and anything above the insurer's cap will not be paid anyway.
  • Guessing at sick pay. Read the contract. It is the single figure the deferment period depends on.
  • Forgetting the policy is a bill too. Include the premium in your essential outgoings.
  • Setting it and forgetting it. Re-check the benefit after a move, a pay rise, a new child or a change in employer benefits.
  • Cutting the term to save money. Trim the benefit or extend the deferment first — those cost you less cover than losing your final working years.

Frequently asked questions

How much income protection do I need?
Start from your essential monthly outgoings rather than your salary. Add up mortgage or rent, bills, food, transport, childcare and existing loan repayments, then subtract any income that would continue if you stopped work — a partner's earnings, group scheme benefits, rental income. The shortfall is the benefit you need to insure.
What is the maximum benefit I can insure?
Insurers cap cover at a proportion of your pre-tax earnings, most commonly 50–70%, and some tier it — a higher percentage on the first slice of income and a lower one above it. The cap exists so that claiming never pays better than working. Any benefit you buy above the cap simply will not be paid at claim.
How do I choose the deferment period?
Match it to how long your income would continue without the policy. Find how many weeks of full and half employer sick pay your contract gives you, add however many months of essential outgoings your savings would cover, and set the deferment at that point. Every extra week of deferment reduces the premium.
Should the policy term run to retirement?
Usually yes. The scenario income protection exists for is being unable to work again, and a term that ends at 55 leaves the last decade of your working life uninsured. Set the term to your expected retirement age unless the premium makes that unaffordable, in which case reduce the benefit before you shorten the term.
Should I insure my partner's income too?
If the household depends on both incomes, both need cover — the loss of either creates a shortfall. Two policies sized to each person's contribution to the bills is normally the right structure, since income protection insures an individual's earnings rather than a household total.
Does income protection reduce my benefits entitlement?
It can. Income protection benefits are counted as income for means-tested benefits such as Universal Credit, so a payout may reduce or remove that entitlement. This is one reason to size cover around your real outgoings rather than buying the maximum available.
Should I index-link the benefit?
Indexation increases your cover, and your premium, each year in line with inflation. Without it, a benefit set today can be worth noticeably less in real terms by the time you claim on a policy running twenty or thirty years. Most advisers treat it as worth having on long-term cover.

Related guides

Guide
What is income protection insurance?

How the cover works, what it costs, and the definitions that decide a claim.

Guide
Income protection vs critical illness cover

Which one to buy first, and why the answer is usually income protection.

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Important: This guide is for information only and does not constitute financial advice. The worked examples are illustrative; benefit caps, definitions and terms vary between insurers. CleverCompare is an introducer appointed representative of Charles Frank Finance Limited, which is authorised and regulated by the Financial Conduct Authority.
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