Your Future Protected

If you couldn't work tomorrow because of illness or injury, how long could your household keep paying the bills? For many people the honest answer is "not very long" — and that's exactly the gap income protection is designed to fill.

What income protection actually does

Income protection pays you a regular, usually tax-free, monthly benefit if you're unable to work due to illness or injury. Unlike a one-off lump sum, it replaces a portion of your earnings — typically up to around 60% of your gross income — for as long as you're unable to work, up to the policy's limits.

How long do payments last?

That depends on the type of policy you choose:

• Short-term cover pays benefits for a set period, often one or two years per claim. It's usually cheaper.
• Long-term cover can pay right up until you return to work, retire, or the policy ends — giving far greater security.

The "deferred period"

Every policy has a deferred period — the waiting time between being unable to work and benefits starting. Common options are 4, 13, 26 or 52 weeks. A longer deferred period lowers your premium, so it's worth matching it to any sick pay your employer provides or savings you could rely on in the meantime.

Who should consider it?

Income protection is especially worth considering if you're self-employed, have little or no employer sick pay, or have financial commitments — a mortgage, rent, dependants — that rely on your income. If you have substantial savings or generous long-term sick pay, your need may be lower.

The bottom line

Your ability to earn is one of your most valuable assets, yet it's often the least protected. Income protection won't make being unwell pleasant, but it removes the financial fear so you can focus on recovery.

As a business grows, so does its exposure. The loss of a key person, a long-term staff illness, or an outstanding loan can all threaten continuity. Here are five forms of cover worth reviewing as your company develops.

1. Key Person Insurance

If losing a particular director or employee would seriously dent your revenue, key person cover pays the business a lump sum to absorb the shock — funding recruitment, replacing lost income, and reassuring stakeholders while you recover.

2. Group Income Protection (Employee Sick Pay)

Long-term staff absence is costly. Group income protection continues an employee's income during extended illness, funded by the insurer rather than your cash flow, and usually includes rehabilitation support to help them return to work.

3. Employee Life Insurance (Death in Service)

A valued, tax-efficient benefit that pays a lump sum — typically a multiple of salary — to an employee's family if they die while employed. It's a cornerstone benefit that helps you attract and retain talent.

4. Business Loan Protection

If your company carries loans, overdrafts or director's loans, this cover ensures those debts can be repaid if a key individual dies or becomes critically ill — preventing a lender from calling in borrowing at the worst possible moment.

5. Relevant Life Cover

Ideal for small companies and directors, relevant life cover provides individual death-in-service style protection funded by the business in a tax-efficient way — useful where there are too few staff for a group scheme.

Where to start

You don't need everything at once. The right mix depends on your size, your borrowing, and who your business depends on. An adviser can help you prioritise based on your specific risks.

Private medical insurance (PMI) isn't a replacement for the NHS — it works alongside it. Understanding where each fits helps you decide whether private cover is worth it for you.

What private cover is good at

PMI is mainly designed for acute conditions — problems that come on suddenly and can be cured or significantly improved. Its biggest advantages are speed and choice:

• Faster access to diagnosis, specialists and treatment, avoiding long waiting lists.
• Choice of hospital, consultant and appointment times.
• Comfort, such as private rooms during a hospital stay.

What the NHS still does best

The NHS remains the right route for emergencies (A&E), chronic long-term conditions, maternity care, and complex specialist treatment. Most PMI policies specifically exclude chronic conditions and emergencies, so the NHS is your safety net for these.

Questions to ask before you buy

• Does the policy cover outpatient consultations and diagnostics, or just inpatient treatment?
• Is mental health, dental or optical cover included or optional?
• What is the excess, and how does it affect the premium?
• Are there limits on therapies, cancer cover, or specific treatments?

The bottom line

If fast access and choice matter to you — and you can budget for the premium — PMI can be valuable peace of mind. Comparing policies carefully matters, because cover and exclusions vary significantly between insurers.

Critical illness cover pays a tax-free lump sum if you're diagnosed with a specified serious condition and survive for a set period — usually 14 to 30 days.

What's typically covered

Most policies cover around 40 to 50 conditions, including cancer (subject to type and staging), heart attack, stroke with permanent symptoms, multiple sclerosis, major organ transplant, and total and permanent disability. Some insurers now offer over 100 conditions, often split into full and partial payment tiers.

What it doesn't cover

Critical illness is not life insurance — if you die before the survival period, no CI benefit is payable. It's also not income protection; the lump sum is paid once, not monthly. Many claims are declined because the condition doesn't meet the policy's precise definition, which is why comparing definitions — not just price — matters.

Getting the definitions right

The ABI's model wording sets a baseline, but insurers vary significantly — particularly for cancer, where some exclude early-stage or non-invasive tumours. An independent adviser can help you compare like for like rather than just on price.

If you have a life insurance policy and haven't written it in trust, the payout may end up delayed, reduced, or caught in your estate when you die. Writing in trust takes minutes and costs nothing.

What does "writing in trust" mean?

When you write a policy in trust, you legally separate it from your estate. You nominate trustees and name your beneficiaries. The insurer pays the trustees directly on your death, bypassing your estate entirely.

The two biggest benefits

1. It avoids inheritance tax. If paid into your estate above the nil-rate band (currently £325,000), the payout could face 40% IHT. Written in trust, it falls outside your estate.

2. It avoids probate delays. Probate can take months or over a year. A policy written in trust can pay out within weeks of a claim being approved.

How to set one up

Most major insurers provide their own trust forms, and your adviser can help complete them correctly. The key is to do it when you take out the policy — doing it retroactively can trigger gift-with-reservation-of-benefit rules.

Inheritance tax raised over £7 billion in the last tax year — a record. With the right planning, you can significantly reduce the IHT burden on your beneficiaries. One of the most effective tools is a whole-of-life insurance policy written in trust.

How IHT works

IHT is charged at 40% on the value of your estate above the nil-rate band (currently £325,000). If passing your main residence to direct descendants, the residence nil-rate band adds up to a further £175,000 — meaning a couple can potentially pass on up to £1 million free of IHT.

The whole-of-life solution

Unlike term insurance, a whole-of-life policy has no end date — it pays out whenever you die. Written in trust, the payout goes directly to your beneficiaries, outside your estate, and not subject to IHT. It won't reduce your estate's IHT liability, but provides funds to pay the bill without forcing a property sale.

Gifting and the seven-year rule

Gifts only fall fully outside your estate after seven years. Life insurance can sit alongside a gifting strategy to cover the residual risk during that period — often called "gift inter vivos" cover.

Private medical insurance can feel complicated. This guide walks through the key decisions and questions worth asking before you buy.

What PMI covers

Most policies cover inpatient and day-patient treatment, outpatient consultant appointments, and diagnostic tests. Higher-tier policies often extend to mental health support, physiotherapy, and cancer treatment. Typically excluded: GP consultations, emergency A&E, long-term chronic conditions, and pre-existing conditions.

Moratorium vs full medical underwriting

Full medical underwriting (FMU) means you declare your history upfront and receive written confirmation of exclusions. Moratorium means you don't declare anything upfront, but conditions treated in the last five years are automatically excluded for the first two years of cover.

Hospital lists and excess

Most insurers offer tiered hospital lists — the more comprehensive, the higher the premium. Choosing a higher excess significantly reduces your annual premium and can be a cost-effective way to self-insure minor claims.

Channel Islands considerations

For clients in Guernsey and Jersey, private healthcare is the norm without an NHS. Policy wording, insurer availability and the hospital network all differ from the UK — specialist advice is particularly valuable.

Employment comes with a quiet set of financial safety nets: statutory sick pay, pension contributions, life cover, group income protection. When you become self-employed, all of those disappear overnight.

The sick pay gap

Employed workers receive at least statutory sick pay (currently £116.75/week for up to 28 weeks). As a self-employed person, you receive nothing if you're unable to work. Income protection insurance directly addresses this gap, providing a monthly benefit — typically up to 60–70% of your earnings — if illness or injury stops you working.

Life insurance and critical illness

Many employed people have death-in-service benefit through their employer — often four times salary. Self-employed people have no equivalent. If you have dependants, a mortgage, or business partners who rely on you, a term life policy is a straightforward fix. Critical illness cover provides a lump sum on diagnosis of a serious condition — particularly valuable if a prolonged illness would stop you trading.

Private medical insurance

Waiting months for NHS treatment isn't just inconvenient if you're self-employed — it directly affects your livelihood. PMI gives access to faster diagnosis and treatment, so you can get back to work sooner.

Think about the person in your business whose loss would cause the most financial damage — the founder, the lead salesperson, the technical expert, or the director managing your biggest client relationships. What would happen to revenue, your ability to service debt, and your staff if that person died or became seriously ill tomorrow?

What key person insurance does

A key person policy is taken out by the business on the life (and often critical illness) of a key individual. If that person dies or is diagnosed with a covered condition during the term, the policy pays a lump sum directly to the business. The funds can cover lost profits, replace the individual, repay business loans, or simply buy time to restructure.

How much cover do you need?

Some businesses calculate a multiple of the key person's salary (often five to ten times). Others model the profit impact — if the individual generates or protects £500,000 of annual revenue, that might be the starting point. Lenders may also require key person cover as a condition of business lending.

Tax treatment

Premiums are generally not tax-deductible (HMRC treats them as capital expenditure), but the policy proceeds are paid free of tax to the business. Your accountant and adviser should review this together.

Relevant life insurance is a form of death-in-service benefit that a company takes out for an individual employee or director. Premiums are paid by the business, the benefit is written in a discretionary trust, and neither the premiums nor the benefit are treated as a benefit-in-kind. It's one of the most tax-efficient ways to arrange personal life insurance.

How it differs from a personal policy

With a personal policy, you pay premiums from post-tax income and the payout falls into your estate unless written in trust. With a relevant life policy, the company pays premiums as a business expense, you receive no benefit-in-kind charge, and the payout goes into a discretionary trust outside your estate — avoiding both income tax and IHT.

Who can use it?

Relevant life policies are available to employees and directors of limited companies. Sole traders and equity partners in partnerships cannot use them. The maximum sum insured is typically 30 times the employee's total remuneration including salary, dividends and benefits.

The trust requirement

For the tax treatment to work, the policy must be written in a discretionary trust from the outset. The trust means the payout doesn't form part of the insured's estate, avoiding IHT. The insured will typically leave a letter of wishes indicating their preferences.

Critical illness cover and income protection are often mentioned in the same breath. They're not interchangeable — each serves a different purpose.

How they pay out

Critical illness cover pays a one-off, tax-free lump sum if you're diagnosed with a specified condition — such as cancer, stroke or heart attack — and survive a set period (usually 14 to 30 days). You receive the money regardless of whether you can return to work.

Income protection pays a regular monthly benefit — typically 50–70% of your earnings — for as long as you're unable to work due to illness or injury. It doesn't pay a lump sum and doesn't pay out if you can still work, even in a limited capacity.

What they cover

Critical illness policies cover a defined list of conditions — usually around 40 to 50. If your condition isn't on the list or doesn't meet the precise definition, no benefit is payable. Income protection is broader: it covers any condition that prevents you from working, including mental health and musculoskeletal problems — conditions that account for the majority of long-term absences.

The case for having both

They complement each other well. A heart attack might trigger a CI lump sum to clear debt or adapt your home, while income protection provides ongoing monthly income if you can't return to work. Together they address both the one-off financial shock and sustained income replacement.

In competitive sectors, candidates compare benefits packages as carefully as salaries. Group insurance benefits sit at the intersection of what employees genuinely value and what businesses can provide cost-effectively.

Private medical insurance

Group PMI is consistently rated as one of the most valued employee benefits. The group rate is significantly lower than an equivalent individual policy, and underwriting terms are often more favourable — pre-existing conditions may be covered on a group scheme that would be excluded individually. It also reduces absence: employees who access private care tend to return to work faster.

Group income protection

Group income protection provides a monthly benefit to employees unable to work due to illness or injury — typically after a deferral period aligning with the employer's sick pay arrangements. It protects the business from the cost of long-term absence, includes early intervention rehabilitation services, and demonstrates a genuine duty of care.

Death in service

Group life insurance pays a multiple of salary (typically two to four times) to an employee's dependants if they die while employed. It's relatively inexpensive for employers but highly valued by employees, particularly those with young families or mortgages.

The cost case

Group schemes benefit from spread risk, so premiums per employee are a fraction of individual policy costs. Employer contributions to registered group life schemes are generally free of NICs and benefit-in-kind tax. For most businesses, the retention and absence-management benefits outweigh the premium cost.