What is short-term income protection insurance?

As the name suggests, short-term income protection (STIP) provides short-term cover to protect your income if you’re unable to work due to sickness or injury (typically offering a payment period of up to 1 - 2 years).

The amount paid out to you is often between 50% - 70% of your usual income and you’ll receive this in monthly, tax-free payments.

This can help you to cover the following key financial commitments while you’re off work:

  • Family living costs - The cost of raising a child until the age of 18 was estimated to cost £160,692 in 2021[1]
  • Mortgage/rental payments - Average mortgage debt stood at £137,934 in 2021[2], with the average rent price in 2022 standing at £1,069 (having risen 8.6% since 2021)[3]
  • Bills and utilities - Energy costs make up 5% of the average UK household budget and these are set to rise in 2022. The average UK household could be spending £164 per month on gas and electric[4]
  • Childcare costs - Average cost of childcare in the UK is £138 a week for part time childcare (25 hours) and £263 a week for full time childcare (50 hours)[5]
  • Debts (such as loans or credit cards) - Average debt per UK household stands at £63,582 in 2022[6]
  • Leisure costs - It’s estimated that UK households spend £205 of their monthly outgoings on recreational activities[7]
  • Other daily living expenses - Such as weekly food shop, petrol or public transport costs, phone contract etc

But how does short-term income protection differ from long-term income protection, and which is the best option to meet your needs?

Keep reading to find out everything you need to know about short-term income protection insurance…

Reassured Advice can compare both short-term and long-term income protection quotes on your behalf to help you find the most suitable solution.

Why not get in contact for your personalised, fee-free and no-obligation quotes? Income protection through Reassured Advice starts from 20p-a-day

Short-term income protection UK [Key points]

Short-term income protection insurance:

  • Provides short-term financial protection if you’re unable to work due to an accident or sickness
  • Typically pays out up to 70% of your usual income in monthly, tax-free payments
  • Can pay out to you for up to 1 - 2 years (depending on the provider)
  • Payments aren’t tied to a specific financial commitment so you can use them however you see fit
  • Payments will begin after your deferred/waiting period has passed (this is the time in between your first sick day and the day your payments commence)
  • Payments will continue until you return to work, until the payment period outlined in your policy comes to an end or until your policy expires (whichever happens first)
  • Cover tends to be cheaper than long-term income protection due to the shorter payment period

Do I need short-term income protection?

Whether you need short-term income protection will ultimately depend on your personal circumstances.

Those with financial commitments and/or a family to provide for will likely benefit from having income protection in place to help make ends meet during a period of ill health or injury.

In particular, you may benefit from short-term income protection if:

  • You’re on a tight budget and want some form of protection in place (premiums for short-term income protection tend to be cheaper than long-term)
  • You receive sick pay from an employer or have other sources of income available to you (short-term income protection can help to top these up)

Those who are self-employed, who don’t receive full sick pay and/or don’t have their own personal savings may benefit from long-term cover.

This is due to the longer payment period potential as it’s possible to be covered for your whole working life with long-term income protection.

Assessing your current financial situation can help you to establish whether short-term income protection is the right fit for you.

Alternatively, you could contact an expert like Reassured Advice. A friendly member of the team will be able to talk through your circumstances and provide you with the most suitable options.

What does short-term income protection cover?

Short-term income protection will cover you for accidents and sickness. This includes:

  • Serious illness that leaves you unable to work
  • Serious injury that prevents you from working

There isn’t a specific set of illnesses and definitions listed within your policy, so you can claim for any illness that prevents you from working (unless it’s pre-existing).

You’ll also be able to claim for injuries sustained from an accident, regardless of whether the accident happened at work or not.

Are there any exclusions?

An exclusion is something that is excluded from your cover and means you won’t be able to make a claim for this reason.

There may be some exclusions written into a short-term income protection policy. These can include (but are not limited to):

How much short-term income protection do you need?

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

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£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.

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

This includes electricity, gas, TV and broadband.

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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.

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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.

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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.

£
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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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Your total cover estimate

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Let us find your best quotes.

Short-term income protection policy

A short-term income protection policy will pay out to you if you’re unable to work due to sickness or injury.

You’ll be able to select certain key policy features to ensure the policy best meets your needs. These include:

Deferred period

This refers to how long you must be unable to work for before your payments will begin.

Payments will only commence if you’re still unable to work once your deferred period has come to end.

Typically, deferred periods can range from 4 weeks to 52 weeks (but this can vary between providers).

How long your deferred should be will depend on your personal circumstances.

For example, if you receive sick pay, you could choose a deferred period that will end once you’ve stopped receiving sick pay.

Definition of incapacity

This will define the circumstances in which you can make a claim on your policy. Typically, there are three definitions:

  1. Own occupation - Will allow you to claim if you’re unable to do your specific job role. This is the most comprehensive definition
  2. Suited tasks - If you’re unable to do your own job you may be asked to do another job that’s suited to your skills and experience instead. If you can’t do either, you’ll be able to claim
  3. Any occupation - You’ll only be able to claim if you’re unable to work at any job

Payment period

The payment period is the period of time in which you’ll receive your income protection payments.

This could be as little as 5 years or could last up until you reach retirement age (if your condition leaves you unable to work again).

How long you’d like your policy to pay out for will depend on your personal needs.

Those who don’t have access to other sources of income may choose a longer payment period to avoid (falling into debt?) having to dip into their own savings.

Premium payment

This will outline how you pay for your policy.

Common premium payment types include:

  • Guaranteed - These are premiums that remain fixed throughout the lifetime of your policy
  • Reviewable - These are premiums that will change over time (this could be for a variety of factors such as age or risk)
  • Age-banded - These are premiums that will increase each year as you age (usually at a guaranteed rate)

Contact a friendly member of the Reassured Advice team who can help you to secure a short-term income policy, with the right terms to meet your needs, at the best available price.

Short-term income protection cost

The price you pay for income protection will depend on your personal circumstances.

However, the exact price you’ll pay for income protection will depend on a variety of factors. These include:

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

The table below shows some example premium quotes.

These quotes are based on a non-smoker, in good health, with an annual income of £30,000. Cover is up to age 65 with a 3 month deferred period and with a maximum benefit amount (pay out amount)

AgePrice per monthMonthly benefitDefinition of incapacityPayment periodPremium payment type
25£6.14£1,625Own occupation1 yearReviewable - age banded
30£6.41£1,625Own occupation1 yearReviewable - age banded
35£6.88£1,625Own occupation1 yearReviewable - age banded
40£8.60£1,625Own occupation1 yearReviewable - age banded
45£11.00£1,625Own occupation1 yearReviewable - age banded
50£14.63£1,625Own occupation1 yearReviewable - age banded


Why not compare quotes through Reassured Advice? Their whole of market comparison can help you to secure the most affordable premium price.

Short-term income protection premiums

You can also choose how you would like to pay for your premiums with a short-term income protection policy.

Premium payment options include:

  • Reviewable premiums
    These are premiums that can change overtime at the discretion of your provider. Premium changes could be as a result of a variety of factors (for example, as your age or level of risk changes). This premium could mean that you pay more than you originally set out
  • Age banded premiums
    These are premiums that will increase each year as you age (usually at a guaranteed rate). While you could pay more each month throughout the policy lifetime, with this premium payment type other factors (such as your smoking status) may not be considered when calculating the cost of your premiums
  • Guaranteed premiums
    These are premiums that remain the same throughout your policy. So you won’t pay more

Reassured Advice can provide short-term income protection solutions with reviewable, age banded and guaranteed premiums.

Short-term income protection redundancy

Typically, short-term income protection won’t cover you for any type of unemployment.

You’ll only be able to make a claim if you’re too ill or injured to work.

However, there are some short-term protection options that can provide unemployment cover, such as Accident, Sickness and Unemployment (ASU).

This is a budget form of insurance cover that allows you to make a claim if you can’t work due to an accident or sickness or if you lose your job as a result of redundancy.

Can short-term income protection cover a mortgage?

Yes, you can use short-term income protection payments to cover your monthly mortgage repayments.

Income protection payments aren’t tied to a specific financial commitment, so you can use them for whatever is necessary - this includes keeping up with mortgage repayments.

However, as the amount of cover you receive is a percentage of your usual income, the amount you receive each month isn’t guaranteed to cover the full cost of your payments (especially if you have other financial commitments to cover too).

Alternatively, you could secure:

  • Mortgage payment protection insurance (MMPI)
    With this form of cover the amount you receive is based on your mortgage and funds can be paid directly to your mortgage provider. This isn’t something we currently offer at Reassured or Reassured Advice
  • Critical illness cover
    This could either be taken out with a life insurance policy or as a standalone policy. It can provide you with a lump sum pay out if you’re diagnosed with a critical illness and unable to work. Depending on your remaining mortgage balance and cover amount, this lump sum could be budgeted monthly or be used to pay off your mortgage in full. Life insurance with critical illness cover starts from 33p-a-day through Reassured º

We have written a dedicated mortgage income protection article if you require more information »

Why not get in touch with Reassured Advice to find the best option to protect your mortgage?

How much will short-term income protection pay out?

How much your short-term income protection policy will pay out will depend on your personal circumstances.

Most commonly, policies will out between 50% and 70% of your usual income in monthly instalments.

For example, if your yearly income was £50,000 and you have a policy that pays out 60% of your income over 12 months you could receive £2,500 each month (totalling £30,000 over the lifetime of your policy).

Reassured Advice can help you to compare quotes from the UK’s leading providers, some of which pay out up to 70% of your usual income.

When will short-term income protection pay out?

You’ll start to receive your short-term income protection payments once your deferred period has passed.

The deferred period is the length of time between when you stop working and when your policy starts to pay out. Payments will only commence if you’re still unable to work after your deferred period has ended.

How long you wish your deferred period to be will typically depend on your personal needs.

For example, someone who has no other sources of income available may need a shorter deferred period than someone who receives sick pay or has their own personal savings .

Short-term income protection claims

Upon the diagnosis of an illness or after an accident has taken place that has left you injured and unable to work, you can make a claim on your policy.

You may be asked to provide medical evidence from your GP or a medical professional to support your claim.

You may also be asked to fill out a claims form to send back to the insurer.

Once your provider has all the correct information your claim will be assessed.

Once your claim has been accepted you’ll need to wait for your deferred period to come to an end.

If you’re still unable to work after your deferred period has come to an end, your payments will commence.

Short-term vs long-term income protection

While both short-term and long-term income protection provide financial support should you become unable to work due to accident or sickness, there are some key differences.

Below you will find the key characteristics of each policy:

Short-term income protectionLong-term income protection
Short payment period (typically between 1 - 2 years but this can vary between providers)Long payment period (cover up until retirement, if this is chosen during the application process)
Premiums tend to be cheaper due to the shorter cover lengthPremiums tend to be more expensive due to the longer cover length
Will pay out for illness or injuryWill pay out for illness and injury
Can pay out up to 70% of your usual incomeCan pay out up to 70% of your usual income
Ideal for those on a budget who want some form of cover in placeIdeal for self-employed workers or others who don’t receive full sick pay from an employer


The main difference between short-term and long-term cover is the length you can receive payments for and the price you pay.

Due to the shorter pay out period, short-term policies tend to be priced cheaper than long-term policies.


The table below shows a price comparison between a short-term income protection policy and a long-term income protection policy.

Quotes are based on a non-smoker, in good health, with an annual income of £30,000

AgeShort-term price per monthLong-term price per month
25£6.14
(1 year payment period)
£10.17
(40 year payment period)
30£6.41
(1 year payment period)
£12.04
(35 year payment period)
35£6.88
(1 year payment period)
£14.98
(30 year payment period)
40£8.60
(1 year payment period)
£19.56
(25 year payment period)
45£11.00
(1 year payment period)
£28.94
(20 year payment period)
50£14.63
(1 year payment period)
£43.74
(15 year payment period)


The right policy for you will depend on what you want to cover and what suits your budget.

Why not use the services of Reassured Advice broker service to compare both short and long-term income protection to find the best solution for you?

Compare short-term income protection quotes

By comparing quotes you can secure the best deal on a short-term income protection policy that meets all of your needs.

Why not let Reassured Advice help you do this?

This will allow you to compare multiple quotes, from the whole of the market, while having a dedicated expert on hand to answer any questions you may have.

Quotes are personalised, fee-free and completely without obligation.

The best part is you can secure short-term income protection from just 20p-a-day.

Simply get in touch for your personalised, free, no-obligation quotes.

Sources:

[1] https://cpag.org.uk/sites/default/files/files/policypost/Cost_of_a_child_2021.pdf

[2] https://moneynerd.co.uk/average-mortgage-debt/

[3] https://homelet.co.uk/homelet-rental-index

[4] https://www.nimblefins.co.uk/average-cost-gas-electricity-bill-uk-household

[5] https://www.moneyhelper.org.uk/en/family-and-care/becoming-a-parent/childcare-costs

[6] https://themoneycharity.org.uk/money-statistics/

[7] https://www.nimblefins.co.uk/average-uk-household-budget

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