Income protection back in focus as household bills bite

Budgets under pressure

The squeeze on household finances has 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 — enough to tip median income growth from a forecast +0.9% to −0.6%.

Mortgages are part 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 fixes expire, up from 3.9 million before the recent conflict. When budgets are tight, the cost of losing an income rises too.

What insurers actually paid out

There’s a persistent myth that protection policies don’t pay. The figures say otherwise.

What income protection actually covers

Income protection replaces part of your monthly income if illness or injury stops you working, paying out month after month until you recover, retire or the policy ends. That’s different from life cover, which pays a lump sum if you die, and critical illness cover, which pays a lump sum on diagnosis of a defined serious condition.

For most households the monthly bills — the mortgage above all — don’t pause when a salary does. That’s the gap income protection is designed to fill, which is why advisers increasingly raise it alongside the mortgage rather than as an afterthought.