What is the maximum amount of cover with income protection insurance?

Understanding how much of your income can be covered

The answer to this question really depends on what type of income protection policy you are referring to. With short-term plans (paying out for up to 12 months) the vast majority will allow you to cover a maximum of 65 per cent of gross (pre-tax) income. However, although uncommon, some short-term plans have started to allow up to 70 per cent of earnings to be covered.

For long-term protection plans (which can payout until retirement) it is still possible to cover up to 65 percent of gross earnings with a limited number of insurers. However, the maximum level of cover with a large number of insurers in this market is 50 percent of gross earnings, with a small number offering percentage limits in-between (mainly at 55 percent of gross income).

All insurers quote at 50% income protection…

Thus, in order to allow all income protection insurers to provide competing quotes the amount of cover should be set at a limit of 50 per cent of pre-tax earnings, although you can go higher if you really need the extra cover.

Given the income limit many insurers impose it is natural to start looking at the maximum amount of cover that can be taken out but it is often better to really think about how much cover you actually need.

For example, if your expenses are £1,500 per month do you really need to pay the extra premium for £2,000 worth of cover? In most cases it is better to think about how much income insurance cover you need in terms of monthly outgoings, rather than income.