Short term income protection insurance

Having the right financial protection in place is essential for ensuring you and your loved ones don’t fall on hard times, should you face a change in circumstances.

Income protection can help to replace any lost income you may experience as a result of being too ill or injured to work or if you lose your job.

Typically, income protection can be taken out on a short or long term basis depending on your needs.

But what’s the difference between the two? And how does short term income protection work?

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

Unfortunately, we can’t currently compare income protection (both short and long term) quotes for you at Reassured.

Short term income protection key points:

  • Can replace a percentage of your income if you become too ill or injured to work, or if you lose your job, (pay out can be between 50% - 70% of your usual salary)
  • Pays out for a short period of time, (from 1 – 2 years depending on the provider and policy terms and conditions)
  • Typically 3 policy types available, (accident and sickness only, unemployment only and accident, sickness and unemployment)
  • You’ll pay a monthly premium for your cover
  • There’ll be a waiting period in between your first sick day and when you start to receive your payments, (the waiting period can vary between providers)
  • Payments can help to cover a mortgage or rental payments, bills and utilities or daily family living costs, (whatever your income would typically cover)
  • 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)

What is short term income protection?

Short term income protection (STIP) is a form of financial protection that will pay out to you if you’re unable to work due to illness, injury or unemployment, (depending on which policy you choose).

The length of cover will depend on the provider and the terms and conditions of the policy type, but generally, it can cover you for 1 - 2 years.

When you make a claim, you’ll need to wait a certain amount of time before you start to receive your payments, (this is known as a waiting period or deferred period).

How long you defer your payments for will largely depend on your personal needs and circumstances.

For example, whether you’ll receive sick pay from your employer (how much you’ll receive and how long for) or whether you’re self-employed and won’t have this benefit.

Generally speaking, the waiting or deferred period can be anywhere from 4 weeks – 1 year (or up to 2 years with some providers).

Your payments will be made in monthly (tax-free) instalments and will typically be from 50% up to 70% of your normal gross salary (this can vary between providers).

For example, if your salary is £30,000 and your policy is designed to pay out at 70%, you could receive £21,000 (£1,750 per month) if you were off work for 12 months after the deferred period.

(The above is a hypothetical scenario. The amount paid out will vary depending on the terms and conditions of the providers).

Payments will continue until you’re well enough to return to work, the payment period specified in your policy comes to an end or the policy expires - whichever happens first.

What does short term income protection cover?

Illness Pre-existing illnesses
Injury due to accident Illness or injuries as a result of alcohol or drug abuse
Involuntary redundancy Self-inflicted injury
  Voluntary redundancy
  Job dismissal


With short term income protection, depending on your policy type, you’ll be covered for accident, sickness and unemployment.

This means that if you become too ill or injured to work, or you lose your job through no fault of your own, you can make a claim on your policy.

What’s covered may vary between providers so it’s important to look through all the terms and conditions to find out exactly what you can claim for.

Unlike other types of financial protection, your pay out won’t be tied to a specific financial commitment.

This means you can use the pay out however you see fit. Income protection payments can be used to cover:

  • Family living costs
  • Rental payments
  • Mortgage payments
  • Bills and utilities
  • Childcare costs
  • Debts (such as loans or credit card payments)
  • Other daily living costs

Whatever your usual income would cover can be covered by an income protection pay out.

Are there any exclusions?

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

  • Pre-existing medical conditions
  • Self-inflicted injuries
  • Injuries or illness as a result of alcohol or drug abuse
  • Voluntarily leaving your job
  • Seasonal unemployment
  • Job loss due to being fired

If you currently have any pre-existing conditions (for example, heart problems) an exclusion for this or any related conditions may be written into your policy.

This means that you won’t be able to make a claim if you are unable to work due to your pre-existing condition.

If you can’t work due to an injury that is self-inflicted or as a result of drug or alcohol misuse, you won’t be able to make a claim.

You also won’t be able to claim if you voluntarily leave your job or if you’re dismissed by your employer.

It’s important to note that during the current COVID-19 pandemic, most providers are not taking on new policies for unemployment cover.

Types of short term income protection

There are different forms of short term income protection which will cover you for different circumstances.

Your cover can be more or less comprehensive depending on the policy you choose.

Short term income protection policies include:

  • Accident and sickness only
  • Unemployment only
  • Accident, sickness and unemployment

Accident and sickness only

With this policy type you’ll be covered if you cannot work to due illness or injury only.

If you become unwell and too ill to work, you can make a claim on your policy (unless your illness is pre-existing).

If you suffer an accident, either at work or outside of work, that leaves you too injured to work you can make a claim.

If you lose your job you won’t be able to make a claim for unemployment with this policy type.


Unemployment only

If you choose this policy type you’ll only be able to make a claim for unemployment.

Your unemployment must be through no fault of your own in order for you to be able to make a claim.

If you’re dismissed, choose to leave your job or take voluntary redundancy you won’t be able to claim.

If your employer makes you redundant, and you didn’t know about it at the point of application, you can make a claim.

You won’t be able to make a claim if you can’t work due to illness or injury with this policy type.

Due to the effects of the current Coronavirus pandemic, most providers are currently not offering unemployment cover to new applicants.


Accident, sickness and unemployment

This policy types offers the most comprehensive cover as you’ll be covered for illness, injury and unemployment.

This means that if you’re too ill or injured to work or you lose your job through no fault of your own, you can make a claim.

Due to the effects of the current Coronavirus pandemic, most providers are currently not offering unemployment cover to new applicants.

The best policy for you will depend on what you want to cover.

For example, if you already have a life insurance policy with critical illness cover you may just want some additional protection in the event of unemployment.

If you have no other forms of cover in place, and it’s not within your budget to take out multiple policies, you may want more encompassing cover.

While we can’t compare income protection quotes for you at Reassured we can compare quotes for critical illness cover (either combined with life insurance or standalone), which pays out if you’re diagnosed with a serious illness and unable to work.


Read our full income protection vs critical illness cover guide.

Can short term income protection cover a mortgage?

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

You can use your payments however you see fit to ease any financial stress you may experience from being out of work.

Depending on how much your monthly mortgage repayments are and how much you receive in your income protection payments, you could use them to keep up with mortgage payments.

Alternatively, you could take out mortgage payment protection insurance (MPPI). This is a form of cover designed to help you keep up with your mortgage payments if you cannot work for a period of time. This is not something we offer at Reassured.

Or, you could take out a life insurance policy with critical illness cover. In the event you’re diagnosed with a life-changing illness (listed within the policy) you can make a claim and receive a lump sum pay out.

This lump sum could be budgeted each month to cover mortgage repayments or it could be used to pay the mortgage off in full - helping to relieve financial stress and ensuring you can remain in the family home.

Why not get in touch with our award-winning team who can help you secure a family life insurance policy with critical illness cover to help protect your mortgage?

Short term income protection insurance redundancy

Unlike most long term income protection policies, short term income protection can pay out due to unemployment.

You’ll be covered for redundancy through an unemployment only policy or through an accident, sickness and unemployment policy.

The result of you losing your job cannot be due to your own fault - for example, if you were dismissed, if you quit your job or if you take voluntary redundancy.

If you’re made redundant and you weren’t aware of this at the time you took your policy out, it’s possible to make a claim and receive a pay out.

The monthly payments you receive can help to replace any lost income until you find a new job, the payment period specified in your policy comes to an end (eg. 12 or 24 months) or until your policy expires - whichever happens first.

Due to the current COVID-19 pandemic, most providers aren’t offering unemployment cover on new policies.

However, if you have an existing policy you should be able to make a claim as per the terms and conditions of your policy.

How much will short term income protection pay out?

Short term income protection will pay out a percentage of your normal salary.

How much is paid out will depend on the provider but, typically, it can be from 50% up to 70%.

For example, if your gross salary is £50,000 and you have a policy that pays out at 60% for up to 12 months, you could receive £30,000 over the lifetime of your policy or £2,500 each month.

(This is a hypothetical policy and amounts may vary depending on the provider and terms and conditions of the policy).

Receiving state benefits (such as Universal Credit) can also have an impact on the amount that is paid out to you, and vice versa. If you’re looking at claiming state benefits due to illness or disability, receiving income protection may affect the amount of benefits you’ll receive.

This is because income protection can be classed as ‘unearned income’.

When will short term income protection pay out?

A short term income protection policy won’t pay out straight away after you’ve made a claim.

This is because there’s a waiting period (or deferred period) added to most policies.

This time period can vary between providers but, generally speaking, it can be a short as 4 weeks or as long as 2 years.

You’ll get to choose the length of your deferred period at the point of application.

This will largely depend on your personal needs and circumstances.

For example, if you benefit from full sick pay or have personal savings, these may be enough to keep you afloat and so you may choose to defer your income payments for a longer period of time (perhaps a year).

However, if you’re self-employed and don’t benefit from full sick pay or you don’t wish to dip into your personal savings, you may choose to have a shorter deferred period (perhaps 4 weeks).

Once the deferred period has passed, your payments will begin and they will continue until you return to work, until the payment period outlined in your policy comes to an end or until your policy comes to an end (whatever happens first).

Short term income protection cost

With short term income protection, you’ll pay a monthly premium to keep your cover in place.

Like with life insurance, you’ll need to provide certain details at the point of application so that providers can calculate the cost of your premium.

This can include:

  • Your age
  • Policy length
  • Payment period (can be up to 2 years depending on the provider)
  • Medical history (any pre-existing conditions)
  • Your occupation
  • Your lifestyle
  • Whether you smoke
  • Policy type
  • Length of waiting period/deferred period
  • Chosen monthly amount you want to receive

As well as information about your lifestyle and medical history, providers will also need to know about your occupation.

In terms of income protection, occupations are typically split into class groups.

Class groups are based on risk. Therefore, less risky occupations (such as professionals, managers, administrators etc) will be class 1.

Those with more manual jobs (such as labourers and those in the building industry), who may be more likely to get hurt, will be in a higher risk group.

Due to the different underwriting processes used, these groups can vary between life insurance providers.

For example, Royal London has 11 class groups whereas Legal & General only have 4.

For this reason, no two quotes will be the same and this highlights the importance of comparing quotes to secure the best deal.

It can seem tempting to lie about any of the above information in the hopes of securing a cheaper premium.

But if it’s found that you withheld information, or were untruthful on your application, a claim can be denied.

For this reason, honesty is always the best policy. It’s completely possible to find affordable cover, no matter your circumstances.

Short term income protection claims

Upon the diagnosis of an illness, after an accident has taken place that has left you injured or after you have been made redundant, you can make a claim on your policy.

If claiming for accident or sickness you may need to provide medical evidence as part of your claim.

If claiming for unemployment, you may need to provide proof of your redundancy.

A pay out will not be made straight after a claim has been made. Pay outs will begin after your deferred or waiting period has ended.

Short term vs long term income protection

The main difference between short term and long term income protection is how long you’ll receive pay outs from the policy for.

Short term income protection will pay out for a set period of time, typically up to 1 - 2 years.

You’ll choose your policy based on what you want to be covered for:

  • Accident and sickness only
  • Unemployment only
  • Accident, sickness and unemployment

Long term income protection will offer a longer pay out period - it’s possible to be covered all the way up until retirement.

However, you’ll only be covered for illness and injury (no cover for redundancy).

You’ll choose from policy types such as:

  • Own occupation (if you’re prevented from doing any aspect of your job)
  • Suited tasks (policy won’t pay out if there are other jobs at work you can do instead of your own)

Due to receiving pay outs from the policy for a longer period of time, long term income protection tends to come with a higher monthly premium.

Short term income protection can be beneficial in helping you cover your expenses if you’re temporarily unable to work.

However, the level of cover provided may not be sufficient if you were to fall more seriously ill.

If you’re unable to work for an extended period of time, long term income protection can provide pay outs until you’re able to return to work.

The policy type you choose will depend on what suits your needs and what fits within your budget.

Do I need short term income protection?

Whether you need short term income protection will largely depend on your own personal circumstances.

Income protection can be beneficial to:

Those who have a family to provide for or have a mortgage to keep up with may benefit from having this form of protection in place to help cover these expenses if they were unable to work.

Those who are self-employed may also benefit from short term income protection should they become unable to work.

Self-employed workers won’t benefit from sick pay from an employer, so monthly income protection payments can be a big financial help.

While income protection won’t pay out as much as a full salary, it can help to ease some financial stress and help to maintain your daily living costs or cover essential expenses.

Read our full guide to self-employed income protection for more information.

You may not need short term income protection if:

  • You receive full sick pay as an employee benefit
  • You have a large amount of savings
  • You have other forms of protection in place to cover you

Overall, whether you need short term income protection will be down to your needs and circumstances.

Comparing your current outgoings and expenses with your available forms of finance may help you to work out what financial protection will best suit you.

Compare short term income protection quotes

By comparing quotes you can ensure you secure the best deal on a policy that meets your needs.

Unfortunately, we can’t currently compare short term income protection quotes for you at Reassured.

However, we can compare life insurance and critical illness quotes from some of the UK’s leading providers - starting from as little as 20p-a-day.

Our award-winning team can help you through every step of the process and answer any questions you may have.

And the best part is we don’t charge a fee for our quotes.

Why not start your life insurance journey today?

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