PROTECTION GUIDES
Income protection and sick pay
Sick pay tends to be shorter and smaller than people expect. Here is how to work out what you would get, and where income protection fits.
The short answer
Sick pay from your employer usually covers the first part of an absence, sometimes only at the statutory minimum. Income protection is designed to start when that support stops or falls, and to carry on paying while you remain unable to work.
Choosing a deferred period that matches the end of your sick pay means you are not paying to insure weeks your employer already covers.
What sick pay you are likely to get
Statutory Sick Pay
Statutory Sick Pay is the minimum employers must pay eligible employees who are off sick. It is a fixed weekly amount, the same whatever you normally earn, and it is far below most people's usual pay. It can be paid for up to 28 weeks. The current rate and qualifying rules are published on GOV.UK and change from time to time.
Company or contractual sick pay
Many employers pay more than the statutory minimum. A common pattern is a period on full pay followed by a period on half pay, with the length often depending on how long you have worked there. Some employers offer little beyond Statutory Sick Pay; others provide long-term cover through a group income protection scheme.
The details are in your contract or staff handbook. It is worth finding them before you decide how much cover you need.
When sick pay ends or drops to half pay
The point at which sick pay stops, or falls to half, is when a long absence starts to bite. Your essential bills stay the same, but your income may fall to a fraction of what you were earning, or to nothing.
If you only receive Statutory Sick Pay, the drop happens almost straight away. If you have generous company sick pay, it may be several months before you feel it. Either way, the question is what you would live on after that point, and for how long.
Worth knowing
Lining up the deferred period with your sick pay
The deferred period is how long you must be unable to work before the policy starts paying. Common choices are 4, 8, 13, 26 or 52 weeks. The longer the wait, the lower the premium.
- •Statutory Sick Pay only: a short deferred period, such as 4 or 8 weeks, may be needed, unless savings can bridge a longer gap.
- •Some weeks of full pay: a deferred period that starts as full pay ends, for example 13 weeks, avoids paying for cover you do not need.
- •Full pay then half pay: decide whether you could manage on half pay. If not, match the end of full pay; if you could, match the end of half pay.
- •Long-term group cover through work: a personal policy may only be needed to top up the group benefit or to keep cover if you leave.
Our income protection product page explains the other policy choices, including how long a policy pays and the definitions of incapacity.
Who it suits, and when it may not be needed
Who it can suit
- •Employees who receive only Statutory Sick Pay
- •Employees whose company sick pay lasts a few weeks or months
- •People who have recently changed job and are not yet entitled to full company sick pay
- •Anyone whose household would struggle once pay drops to half
When it may not be needed
- •Your employer provides group income protection that would pay a suitable proportion of your salary until retirement
- •Your company sick pay lasts a long time and your savings would cover any remaining gap
- •Another household income would meet your essential bills without your pay
What affects the amount and cost of cover
- •Your gross earnings, which set the maximum benefit, usually between 50% and 65% of gross income
- •The deferred period you choose, set against when your sick pay ends
- •Whether the policy pays until retirement or for a limited period on each claim
- •Any group income protection benefit you already have, which insurers may take into account
- •Your occupation, age, health and smoking status
Insurers may reduce the benefit if you are also receiving other income while you are off work, such as continued sick pay or benefits from another policy. How this works varies between insurers, so it is worth checking before you apply.
Next steps
Find your sick pay terms and note how long you would receive full pay and half pay. With that, and a figure for your essential monthly bills, we can suggest a deferred period and benefit, and compare policies on their terms as well as price.
If you also want a lump sum on a serious diagnosis, our critical illness cover page explains how that works alongside income protection.
Talk to us about matching cover to your sick pay
Tell us what your employer pays and for how long, and we will suggest a deferred period and benefit that start where your sick pay leaves off. There is no fee for our advice.
How CoverLife can help
CoverLife Insurance gives personalised protection advice, with a dedicated adviser for your application and ongoing support. We have access to a panel of 15 protection insurers, with availability varying by product and circumstances, and we compare benefits and terms alongside price. We also help with policy reviews and with applications involving medical conditions, unusual occupations or hazardous hobbies.
We charge no advice or arrangement fee; we receive commission from the insurer. CoverLife Insurance is a trading name of CoverTrade Risk Management Ltd, authorised and regulated by the Financial Conduct Authority, firm reference number 1020148. More about CoverLife
Related guides
The questions people usually ask next.
- Why consider income protection?Start with the wider question of how long your household could manage without your pay.
- Paying your mortgage or rent if you cannot workOnce sick pay stops, housing costs are usually the first pressure.
- Self-employed income protectionNo sick pay at all: how the choice of deferred period changes when you work for yourself.
- Review your existing protectionCheck how workplace benefits and any existing policies fit together.
Common questions
How long does Statutory Sick Pay last?+
Statutory Sick Pay can be paid for up to 28 weeks. It is a fixed weekly amount set by the government, which is well below most people's normal earnings. The rate and the eligibility rules change from time to time, so check the current position on GOV.UK.
Where do I find out what sick pay my employer pays?+
Your contract of employment, staff handbook or HR team should set out your sick pay terms. Look for how long you would receive full pay, whether it then drops to half pay, and whether the amount depends on how long you have worked there.
Should my deferred period match the end of my full pay or my half pay?+
It depends on whether you could manage on half pay. If half pay would not cover your essential bills, the policy can start when full pay ends. If you could manage, starting it when half pay ends usually costs less.
Does my employer's group income protection replace a personal policy?+
It may do, but check the details. Group schemes usually stop when you leave the employer, may pay for a limited period and are often taxed differently from personal cover. Some people use a personal policy to fill a gap in the group scheme or to keep cover if they change jobs.
What if I change job and my sick pay changes?+
Your policy stays in place, but the deferred period may no longer fit. Some insurers let you change the deferred period, subject to their terms and sometimes further questions. It is worth reviewing your cover whenever your sick pay changes.