Sick Pay Insurance pays out a proportion of your gross monthly income if you’re unable to do your own occupation due to any illness or injury. It’s also known as Accident & Sickness Insurance.
If you have limited or no sick pay entitlement, the insurance can step in to replace lost earnings while you’re too ill or injured to work. It ensures you can keep up with all your essential outgoings if you’re off sick including:
You need to declare any pre-existing conditions when you set up Sick Pay Insurance. Each insurer then has their own stance on how they will provide cover based on your condition(s), your circumstances and its appetite for risk.
If you have an existing health condition, an insurer might:
Cover the condition and apply standard terms (so you won’t face any difference in the price or terms of your cover compared to a healthy individual)
Cover the condition but require you to pay an additional premium
Exclude the condition but offer a date at which it will consider reviewing this
Exclude it entirely (potentially with a premium discount to compensate for this).
If you have a pre-existing medical condition it is best discussing your options with an expert. We have direct access to the underwriters at every top UK insurer and can therefore help you get the best possible terms.
If you need help give us a call on 02084327333 or email firstname.lastname@example.org.
Are There Any Exclusions?
As with all insurance policies there are some blanket exclusions which apply to everyone. These typically include illness or injuries sustained:
During the pursuit of criminal activities
As a result of illegal / illicit drug use, or from substance / alcohol misuse
During travel to areas of active internal conflict, high terrorism risk, political instability or countries that the Foreign and Commonwealth Office (FCO) has advised against travelling to.
Other than that, your insurer determines what your sick pay insurance covers based on your medical history.
Despite this risk, it’s worth considering that the self-employed and company directors have no employer to offer sick pay if they do fall ill. Even if you do have an employer, many only offer the legal minimum in benefits (Statutory Sick Pay at £95.85 per week).
Like Mrs Mummypenny, that’s why many people take out sick pay insurance for the valuable peace of mind it can offer.
Could I Rely On Other Safety Nets?
Of course, Sick Pay Insurance isn’t the only option to protect your earnings if you’re too ill to work. However, for many people other options aren’t always viable alternatives.
This means a sizeable proportion of people have less than 2 weeks’ expenditure saved up to cushion the blow if they couldn’t earn.
Minimal State Benefits
Also, while a lucky few get full sick pay from their employers, this isn’t true for everyone. You may only be entitled to minimal pay, typically Statutory Sick Pay (SSP) at £95.85 per week.
Your employer must offer you at least Statutory Sick Pay for the first 28 weeks of your illness, but anything above this is discretionary.
If you’re not entitled to SSP, perhaps because you’re self-employed or don’t earn enough to meet the threshold for SSP, then the main state benefit if you’re off sick is Employment and Support Allowance (ESA). This starts at just £74.35 per week for the over-25s depending on the nature of your disability.
While other government benefits are available, these depend on the nature of your disability and your circumstances. Even combined they rarely add up to pre-incapacity household expenditure.
Are The Self Employed Entitled To Sick Pay?
One of the most common questions our clients ask is whether the self-employed get Statutory Sick Pay. Unfortunately, if you work for yourself you don’t get SSP as there’s no employer to pay it.
That means the self-employed need to look after themselves. Without any form of personal income protection, the self employed have to rely on the less generous Employment and Support Allowance.
Given all of the above, Sick Pay Insurance can be a hugely important lifeline for many people.
How Much Does Sick Pay Insurance Cost?
Your monthly premiums are calculated based on a variety of factors, including:
We’re more likely to develop illnesses / injuries as we get older, so cover becomes more expensive as we age
Any health conditions you have
An insurer may increase premiums if you have a pre-existing health condition or simply exclude it from coverage outright
Your smoker status
Most, although not all, insurers charge smokers more to reflect the fact that they’re more likely to get ill, and to become more seriously ill, due to smoking
Some jobs are riskier than others, with higher chances of workplace injuries. Furthermore, accidents and sickness are more likely to keep you from doing a physically-demanding manual role than they are to stop you doing a less demanding desk-based role, so manual workers are often more likely to make a claim.
In the below table, we’ve used our sick pay insurance calculator to compare quotes from the top UK insurers. To get indicative costs we’ve assumed that each individual is:
In good health
Looking for £1,500 in monthly benefits
Seeking an 8 week deferral period
Going to match their cease age with a retirement age of 65
Looking for long-term cover.
The Sick Pay Insurance quotes below represent the cheapest policy that matches the above criteria from across the entire UK market. While the calculation offers a rough estimate of the price of cover, your circumstances will likely vary and so your own premiums could differ.
25 years old
35 years old
45 years old
Sick pay insurance quotes accurate as of March 2022
Policy Options Which Impact The Cost
As well as personal factors, you have a number of policy options to choose which will impact the cost of premiums. These include:
Level of Cover
The monthly benefit you receive each month. You can protect up to 70% of your gross earnings. The higher your benefit, the more expensive your premiums.
ADVISER TIP 🤓
Don’t simply go for the maximum benefit you can insure just because it’s available. This will mean higher premiums. Instead, carefully work out how much you need to cover your essential outgoings first.
Length of Cover / Policy Cease Age
This is the how long your policy will last. When you take out cover, you choose the date your policy ends, known as your cease age. You typically align this with your expected retirement age, at which point you should have access to other income, such as pensions.
Most insurers allow a cease age of all the way up to 70. However, the older your cease age, the more expensive your premiums.
How long the policy pays out a monthly income if you fall ill. This depends on the type of policy you choose.
Long-term sick pay insurance, on the other hand, pays out for as long as you need it, right up until your policy cease age if you can never work again.
We tend to recommend long-term cover over short-term options as it’s more comprehensive. However, if you’re on a budget, short-term protection is better than having no policy at all.
The length of time you have to wait before the policy pays out after you fall ill and stop working. The shortest deferred periods are 1 week, while the longest are 12 months.
The longer you can wait before the cover kicks in, the lower the cost of your cover.
Including Unemployment Cover
Some insurers offer Accident, Sickness & Unemployment (ASU) policies. These combine Accident & Sickness Cover with Unemployment Insurance in case you’re ever made redundant.
However, the sickness cover on such policies is often inferior to a traditional Income Protection policy.
For this reason, we typically recommend buying comprehensive Sick Pay Insurance and then, if you want redundancy cover, a separate Unemployment Insurance policy.
This will pay out for 12, 18 or 24 months if your employer makes you redundant, offering short-term reprieve so you can continue to meet your outgoings while you look for another job.
Type of Premium
The type of premiums you choose also impacts the cost of cover over time. You have two types of premium to consider when buying Sickness Insurance:
These premiums rise each year at a preset rate which is laid out in your policy documents. The increase is solely linked with your age and the increased risk of a claim as you get older.
Fixed for the life of the policy. These do work out more expensive than age-banded premiums initially but, as they’re fixed, it’s often cheaper for the life of the policy.
IMPORTANT NOTICE 🧐
Some inferior products which include Payment Protection Insurance (PPI) offer cover with reviewable premiums. The insurer can increase premiums as it sees fit which could potentially make your cover unaffordable in the future.
How Do I Make a Claim?
Once you have a policy in place, making a claim is fairly simple.
Firstly, it’s important you speak to your insurer as soon as you think you’re going to be out of work for longer than your deferral period. This gives your insurer plenty of time to assess your claim.
Then you fill in a claims form. This used to be a physical document, but increasingly insurers are allowing online submissions. You send off your claim with supporting medical evidence which will need to be approved before your monthly income payments will commence.
Neil’s Cancer Claim With British Friendly
Neil is a Drewberry client who bought a British Friendly Income Protection policy. He had the cover for 4 years before he needed to claim.
It started when he became unwell with stomach pains. After visiting his GP and having some tests, consultants diagnosed Neil with stage 2 bowel cancer. He was unable to work while he had surgery and recovered, so made a successful claim with British Friendly.
Most people understandably want to choose cover by picking the insurer that’s most likely to pay out when they need it the most.
However, it’s actually fairly hard to distinguish one provider from another in this area. Payout rates across the industry are not only higher than many people assume but are also fairly uniform.
For example, as you can see in the table below, most insurers pay more than 90% of all claims they receive.
Legal & General
Payout statistics alone should not be used to decide which insurer offers the best Income Protection.
Instead, payout rates should be used as a rough guide to compare successful claims across the industry as a whole.
Beware Payment Protection Insurance (PPI) ⚠️
Beware as some insurers and websites label Payment Protection as Income Protection even though it is a far inferior product.
Payment Protection Insurance (PPI) has quite rightly had some bad press over the years. While it may sound similar to Sick Pay Insurance, it is in fact very different from a truly comprehensive sickness insurance policy.
Firstly, Payment Protection Insurance only pays out short-term. This means if you were so ill you could never work again it would stop paying out after a set period, even if you still couldn’t work.
Secondly, insurers don’t medically underwrite PPI. That means you don’t know what your policy will and won’t cover you for until you need to claim.
Lastly, PPI often includes blanket exclusions on conditions such as back pain and mental health concerns, which represent some of the most common claims on Sick Pay Insurance.
Common Sick Pay Insurance Questions
Can Self Employed Take Out Sick Pay Insurance?
Many self employed choose to take out sick pay insurance because they don’t have the luxury of company paid sick leave.
So long as the self employed are able to show evidence of their earnings they are eligible. There are even some policies which are specifically designed for directors whose earnings are made up of salary and dividends.
Does It Cover Unemployment?
Sick pay insurance pays out a monthly income if you cannot work due to accident or sickness. Although the core policy doesn’t cover unemployment there are some providers who offer a bolt on for redundancy.
It is important to get expert advice if you want to include Unemployment Insurance as you do not want to confuse this with a Payment Protection policy which provides inferior accident and sickness cover.
How Is It Taxed?
The monthly premium is debited from your net income (after tax). Should a claim arise it is paid into your bank account tax free.
Who Are The Top UK Sick Pay Insurance Providers?
Ultimately, the best provider for you depends on your circumstances.
That’s because different insurers prefer different risks. For example, some are more competitive for higher-risk and manual occupations, while others are better if you want a longer deferred period.
There are a range of insurers to choose from — we work with all the leading UK insurers which include:
It is vital to compare quotes from all the leading UK providers to ensure you are getting the most competitive sick pay insurance for your personal circumstances.
Our online quote comparison tool will do the hard work for you, while our experts are on hand to help answer any questions you may have. If you need help give us a call on 02084327333 or email email@example.com.
Insurers have designed many such benefits with overall wellness in mind. You can therefore use them to reduce the chances of you needing to claim or to help speed up your recovery if you are ill.
Additional benefits may include:
Remote GP appointments
Medical helplines, offering convenient telephone access to trained doctors and nurses for advice on minor medical ailments
A fixed number of physiotherapy sessions per year (either online or in person)
A fixed number of counselling / cognitive behavioural therapy sessions per year (either online or in person)
High street discounts
Discounts on gym memberships / fitness trackers
Hospitalisation benefit, paying out a cash benefit each day you spend as an inpatient in hospital
Second medical opinion service, providing access to world-leading medical experts to offer a second opinion on a diagnosis or course of treatment.
Many such services are available to not only you as the policyholder but also your immediate family, such as your spouse / civil partner or dependent children.
Can A Limited Company Pay for Sick Pay Insurance?
If you’re a director of a business you can get suitable cover but it’s important to take advice. This is because, for tax reasons, most directors typically pay themselves a small salary and top the rest of their income up with dividends.
With your remuneration usually very different from the way employers pay their employees, insurers therefore need to consider your income in a different light.
In the event of a claim, the insurer pays the benefit into your business. It’s then up to you to distribute the payout in a tax-efficient manner in line with advice from your accountant.
Sick Pay Insurance For Employees
Personal Sick Pay Insurance is traditionally for individuals only. However, if you’re a business who wants to provide cover for your employees, you could consider Group Income Protection.
Here, the business owns and pays for the scheme for the benefit of a group of workers. You’ll usually need at least five staff to set up a group scheme.
If an employee needs to claim, the insurer pays the benefit to the business. You as the employer then distribute this as a sick pay benefit to the employee in the same way you’d pay their wages, such as through PAYE.
Many insurers include valuable extras free with these policies. For example, you might get access to an Employee Assistance Programme or similar scheme, which can help manage your sickness absence and sick pay liability.
Compare Sick Pay Insurance Quotes & Get Expert Advice
We’re here to ensure you and your family don’t miss out on financial security because you didn’t have appropriate cover in place.
Given the complexities of taking out the best cover, particularly for the self employed, we recommend speaking to our team of experts. We’re here to provide you with fee-free advice to ensure you’re making an informed decision.
Why Speak to Us?
We started Drewberry™ because we were tired of being treated like a number.
We all deserve a first class service when it comes to issues as important as protecting our health and our finances. Below are just a few reasons why it makes sense to talk to us.
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We are an award winning 🏆 independent insurance broker who works with all the leading UK insurers
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