What is the difference between income protection and life insurance?

Both life insurance and income protection are insurance policies, however, they differ in the way they pay out and their reasons for paying out.

Life insurance will pay out a lump sum to your loved ones if you pass away during the term of your policy.

Whereas, income protection will pay out monthly income payments if you become too ill or injured to work.

Income protectionLife insurance
Pays out to you if you can’t work due to illness or injuryPays out to your loved ones upon your death
Pays out in monthly payments (to mimic a monthly income)Pays out in a single cash lump sum
Cover amount can be up to 70% of your usual income (known as a benefit amount)Cover amount (or sum assured) can be up to £1,000,000
Can help you to make ends meet by covering mortgage or rent payments, household bills, monthly debt or loan payments and daily living costs (whatever your usual income would cover)Can help loved ones to cover rent or mortgage payments, pay off outstanding debts in your name, pay for your funeral, cover daily living costs, or it can be left as an inheritance
Can choose between long-term or short-term coverPolicy options include term (level and decreasing), whole of life and over 50s plan
Policies often have an upper age limit (this is usually around 60 but can vary between providers)Policies often have an upper age limit (this is usually around 80 but can vary between providers)
Can be taken out from 20p-a-day through Reassured AdviceCan be taken out from 20p-a-day through Reassured

According to This is Money, 39% of people wouldn’t take out income protection if they had an existing life insurance policy[1].

But, if it’s within your budget, it could be valuable to have both polices in place as they will provide protection for different scenarios.

This can help to provide a comprehensive cover solution for you and your family should the unexpected happen.

Keep reading this complete life insurance vs income protection guide to decide which policy option is best for you…

Life insurance, critical illness cover and income protection

These policies are often talked about together, but there are some key differences you should be aware of:

  1. Life insurance - Pays out a lump sum to loved ones upon your passing
  2. Critical illness cover - Can be taken out as a standalone policy or added to a life insurance policy for an additional cost. It will provide you with a lump sum pay out if you’re diagnosed with a serious illness (that’s listed within your policy)
  3. Income protection - Will pay out a percentage of your income if you’re unable to work due to sickness or accident

While life insurance differs as it pays out upon your passing, income protection and critical illness cover are similar in the fact that they pay out if you experience a period of serious illness.

While they have some similarities, the two options are actually quite different. Critical illness cover will pay out to you in a lump sum, whereas income protection will pay out in monthly instalments to mimic an income.

To find out more you can read our income protection vs critical illness cover article »

Keep reading for our complete life insurance and income protection comparison…

How does income protection work?

Income protection works by paying out a percentage (typically up to 70%) of your usual income if you’re unable to work due to sickness or accident.

How income protection works:

  1. Apply for income protection (you could go direct to any provider or use the services of Reassured Advice)
  2. Choose your policy terms such as whether you’d like long-term or short-term cover and decide on a benefit amount (this can be up to 70% of your income but you’re not required to take out the full amount)
  3. Decide your deferred period (this is the period of time in between making a claim and when your payments will begin, typically this can be between 4 - 52 weeks but can vary depending on the provider)
  4. Choose your definition of incapacity (this will help to outline the terms of what you can and can’t claim for. You can choose between own occupation, suited tasks/suited occupation and any occupation)
  5. You’ll also need to provide key information during the application process (such as your medical history, occupation and smoking status etc). This, along with your policy details, will allow insurers to calculate your premium
  6. Choose how you would like to pay for your premiums. (You can choose between guaranteed premiums, reviewable premiums and age-banded premiums)
  7. Once your application has been accepted, your policy will become active and cover will be in place
  8. If you become incapacitated and can’t work, you can make a claim
  9. If you’re still unable to work by the time your deferred period has come to an end, your monthly payments will commence
  10. Payments will continue until you recover and can return to work, until your payment period comes to an end, until your policy expires or until you retire (whichever happens first)
What is income protection infographic desktop

Why not let Reassured Advice help you through every step of the income protection application process?

How does life insurance work?

Family life insurance works by providing a lump sum pay out to your loved ones after your death.

How life insurance works:

  1. Apply for life insurance (you could do this direct with any provider or you could use a broker, like Reassured, to help you)
  2. Choose your policy type, sum assured and decide on a term length
  3. Provide key information (such as your smoking status and medical history) so that insurers can calculate your life insurance premium
  4. Once your application has been accepted, your policy will become active and cover will commence
  5. You’ll need to continue to pay your monthly life insurance premiums while your policy is active to keep your cover valid (if you stop paying your premiums your policy will become invalid)
  6. If you pass away during the term of your policy your loved ones will be able to make a claim
  7. Loved ones will need to contact your provider to let them know of your death and to get the claims process started
  8. On receipt of a successful claim, your insurer will pay out the specified sum assured to your loved ones

Why not check out our in-depth how life insurance works in the UK article to find out more »

Do I need life insurance or income protection?

Life insurance and income protection are designed to cover you in different circumstances, so it’s doesn’t always have to be a case of only choosing one.

Anyone with financial dependents is likely to benefit from having life insurance to provide much needed financial aid when you’re no longer around to provide for them.

Similarly, if your family would struggle to make ends meet if you were unable to work, income protection can provide essential financial support.

This is where having both policies in place could be particularly beneficial, to ensure all needs are covered.

If you have no one that depends on you financially, income protection may be more beneficial as it can help you to maintain your current lifestyle by allowing you to keep up with rent, bills and personal loans while you’re unable to earn your usual income.

Who benefits from having life insurance?

  • Those with a family
  • Those with others who depend on them financially (an elderly parent, a sibling etc)
  • Those with a mortgage (shared with a partner, family member or friend)
  • Couples with shared financial commitments

Who benefits from having income protection?

  • Those with a family
  • Those with financial commitments (either by yourself, with a partner, family member or friend)
  • Self-employed workers (or those who don’t receive full sick pay)
  • Those with no personal savings

Why not speak to an expert, like Reassured, to help you find our ideal policy?

How much income protection insurance do you need?

Enter your monthly financial commitments to understand the level of income protection cover you require.


£723 a month is the average monthly mortgage payment in the UK, with the average monthly rental price coming in at £700.

The majority of our monthly income will go towards rental or mortgage payments.

For this reason, it’s essential to have precautions in place to ensure you could keep up to date with your payments if you weren’t receiving your usual income.

Monthly income protection payments can help to cover this large expense and ensure you can stay in your home.


According to the Money Advice Service, the average household spends £340 a month on household bills.

This includes electricity, gas, TV and broadband.


Childcare costs are on the rise with it now costing £137.69 per week for part-time nursery for a child under the age of two.

That’s over £550 per month - is this an amount you’d be able to keep up with if you were unable to work?

Becoming ill could also result in the need for additional childcare while you attend doctors’ appointments or medical treatment.


The average household in the UK spends around £97 a week on their food shop, totaling £388 a month.

While this may seem like a small amount in comparison to some of the other expenses mentioned, the food shop is often where we try to scrimp and save when we fall on hard times.

Income protection can take care of the cost of your weekly food shop, as well as many other essential costs.


At the beginning of 2020, credit card debt in the UK was at £2.1 billion, with almost 27 million UK residents in some kind of debt.

Becoming unable to work could make it hard to keep up with credit card or loan payments (including car finance or other financed goods).

Failure to keep up with payments could result in additional interest being incurred or late fees issues - resulting in a higher total needing to be paid.


The average spent on public transport each month comes to an average of £94.

This includes the cost of public transport, as well as petrol and diesel vehicles.

While this amount may reduce while you’re unable to work as you won’t need to commute there may be additional spending on public transportation if your illness or injury leaves you unable to drive.


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Can you get life insurance and income protection together?

Income protection can’t be added to a life insurance policy, meaning you’ll need to take out two separate policies.

If it meets your needs, and if your budget allows, you can take out a life insurance and income protection policy simultaneously.

In the event of your passing, life cover could be used to help loved ones:

  • Cover mortgage or rent payments
  • Pay for your funeral
  • Afford additional childcare costs
  • Cover daily living costs such as household bills
  • Meet future family living costs (such as further education costs)
  • Pay off outstanding debts in your name
  • Receive an inheritance

And the income protection policy could help you to:

  • Cover mortgage or rent payments
  • Pay for household bills (gas, electric, water, broadband etc)
  • Pay for childcare
  • Cover transportation costs
  • Loan or debt payments (such as credit cards or car finance payments)
  • Do the weekly food shop
  • Cover leisure costs

What is the cost of life insurance vs income protection insurance?

Both life insurance and income protection can be secured from just £5 a month.

However, with both policy types, the exact price you pay will depend on certain key information - as well as your policy details.

Details taken into consideration to calculate your life insurance premium include:

  • Age
  • Health and wellbeing
  • Medical history
  • Smoking status
  • BMI
  • Policy type
  • Level of cover
  • Length of term

Details taken into consideration to calculate your income protection premium include:

  • Age
  • Health and wellbeing
  • Smoking status
  • Occupation
  • Length of payment period
  • Length of deferred period
  • Definition of incapacity
  • Premium payment type

The tables below display the cover amounts you could secure for a premium price of £5 for both life insurance and income protection.

Life insurance:

AgeSum assured (full pay out amount)Monthly premium
20 (20-year term)£246,797£5
25 (20 year term)£159,211£5
30 (20 year term)£120,783£5
35 (20 year term)£82,631£5
40 (20 year term)£54,221£5
45 (20 year term)£39,277 £5
50 (20 year term)£26,671 £5

(Quotes are based on a level term life insurance policy for a non-smoker. Quotes are subject to individual status and medical underwriting)

Why not use the award-winning services of Reassured to secure the right life insurance policy at the best available price?

Income protection:

AgeBenefit amount (monthly pay out sum)Monthly premium
(reviewable and age banded)
(reviewable and age banded)
(reviewable and age banded)
(reviewable and age banded)
(reviewable and age banded)
(reviewable and age banded)
(reviewable and age banded)

(Quotes are based on a non-smoker with cover up to age 65 with a 3 month deferred period. Quotes are subject to individual status, occupation and medical underwriting)

Reassured Advice can help you to compare quotes for income protection from all major UK providers, ensuring you secure the most cost-effective policy.

What are the pros and cons of income protection?

The main benefit of income protection is that it can replace lost income during periods of ill health or injury.

As up to 70% of your usual income is paid out on a monthly basis, you can use the funds to cover whatever you would use your income to pay for.

This means you don’t have to dip into savings or make cutbacks to your daily life.

Will help to replace lost income while you’re unable to workWon’t pay out to your loved ones if you pass away
Up to 70% of your usual income can be paid outDoesn’t pay out your full income
Pays out for a wide range of illnesses and injuriesShort-term income protection will only pay out for a maximum of 2 years (which may not be sufficient if you are incapacitated for longer)
Payments aren’t tied to specific financial commitments so they can be used however you see fitCan be possible for you to not fall ill or injured during the policy lifetime
Can be possible to make multiple claims under one policyPremiums can become expensive if high risk factors are identified
Long-term income protection can pay out to you until you reach retirement (providing cover for your whole working life)
Can be purchased from as little as 20p-a-day through Reassured Advice

A member of the Reassured Advice team will be happy to help you compare a range of income protection quotes and help you through the application process.

What are the pros and cons of life insurance?

The main benefit of life insurance is that it can help to provide essential financial support for your loved ones when they need it the most.

Having to make life changes to meet a new budget can be stressful, especially at a time of grief.

A life insurance pay out can provide the funds to ensure that mortgage payments or rent is covered, as well as other daily living costs - allowing your family to carry on with their current lifestyle.

Provides you with peace of mind that loved ones are taken care of after your passingWill only pay out upon your passing (or after a terminal illness diagnosis)
Loved ones can use the funds from the pay out to cover essential living costs and pay for your funeralWith term life insurance it’s possible to outlive your policy
Extra safety nets of protection can be added to your policy (such as terminal illness cover or critical illness cover)It can be possible to pay more into the policy than it will pay out (if taking out whole of life cover or an over 50s plan)
Can be purchased from as little as 20p-a-day through ReassuredPremiums can become expensive if high risk factors are identified

At Reassured we can answer any questions you might have about life insurance, while providing you with support throughout the entire application process.

Compare income protection and life insurance quotes

The easiest way to understand what option is best for you is to speak to an expert.

This could be a life insurance policy, an income protection policy or both policies simultaneously.

Our team at Reassured will be happy to talk through your life insurance needs and help you compare quotes from some of the UK’s best providers.

The team at Reassured Advice can help you compare income protection quotes from all major UK providers, while providing you with all the information you need to make an informed decision.

Why not get in touch to find your ideal cover solution? Quotes are personalised, without obligation and fee-free.

The best part is, both life insurance and income protection can be secured from as little as £5 a month.


[1] https://www.thisismoney.co.uk/money/lifeinsurance/article-7907427/If-life-insurance-youre-likely-income-protection-need-both.html

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