Income protection back in focus as household bills bite

Budgets under pressure

Tighter household finances have put a familiar question back on the table: what happens to the mortgage if your income stops? The Resolution Foundation estimates the typical working-age household will be £480 worse off this year as higher energy prices feed through. That is enough to tip median income growth from a forecast +0.9% to −0.6%.

Mortgages sit right in the middle of that picture. The Bank of England expects around 5.2 million holders (roughly 58%) to face higher payments by the end of 2028 as cheap fixed-rate deals expire, up from 3.9 million before the recent conflict. When money is already tight, the cost of losing an income climbs with it.

What insurers actually paid out

You will sometimes hear that protection policies rarely pay out. The 2024 numbers say otherwise.

What income protection actually covers

Income protection replaces part of your monthly income if illness or injury stops you working. It keeps paying month after month until you recover, retire or the policy ends. That works differently from life cover, which pays a single lump sum if you die, and from critical illness cover, which pays a lump sum when you are diagnosed with one of a defined list of serious conditions.

For most households the monthly bills, the mortgage above all, carry on even when a salary stops. That is the gap income protection insurance is built to cover, and it is why more advisers now bring it up alongside the mortgage itself.