For impartial information about insurance, please visit the Money Advice service website at www.moneyadviceservice.org.uk
Income protection insurance pays out an income if you’re unable to work because of illness or injury. Income protection insurance aims to put you back to the position you were in before you were unable to work. It pays a regular tax- free monthly income.
It does not however allow you to make a profit out of your misfortune. So the maximum amount of income you can replace through insurance is broadly the after-tax earnings you have lost less an adjustment for state benefits you can claim. This is usually translated into a maximum of 50% to 65% of your before-tax earnings.