The insurance you’ve probably never thought about
We insure almost everything without a second thought. The car, the house, the contents, our pets, the phone – what would we do without the phone? But the one thing we rarely insure is the income paying for all of it. Try to imagine life without it!
Financial protection insurance exists for exactly that gap. It pays out when illness, injury or death gets in the way of ordinary life. Different policies solve different problems. It’s worth knowing what each one actually does, before you assume you’re already covered.
Life insurance
Nobody buys life insurance for themselves. It’s entirely for the people left behind, which is either quite generous or slightly morbid, depending on how you look at it.
A valid claim pays a lump sum to your beneficiaries. Families typically use it to replace lost income, clear debts, or simply buy some breathing room. Level term cover keeps the sum insured the same throughout the policy. Decreasing cover reduces it over time, usually to track a repayment mortgage. Insurers paid out on 96.7% of life insurance claims in 2025, according to the Association of British Insurers, so a valid claim is far more likely to pay out than most people assume.
Income protection
Your income keeps the whole show running. It would be convenient if the mortgage, the food shop and the electricity bill paused whenever you fell ill. They don’t. I have sat with clients three months into a long illness, watching the direct debits carry on regardless. It is not a comfortable place to be.
Income protection pays a regular replacement income if illness or injury stops you working, usually a proportion of earnings rather than the whole salary. The Association of British Insurers put the claims-paid rate for income protection at 79% in 2025, lower than life or critical illness cover, largely because so many claims involve longer-term or more complex conditions.
If you’d struggle to maintain your lifestyle on savings or employer benefits alone, our guide to what income protection covers is worth a proper look. For the self-employed, who have no sick pay to fall back on, I would go further and call it essential.
Critical illness cover
Critical illness cover works differently again. Rather than replacing an income, it pays a tax-free lump sum on diagnosis of a serious illness named in the policy. Most commonly cancer, heart attack or stroke, though what counts varies considerably between insurers, so it’s worth reading MoneyHelper’s plain-English explanation of how definitions differ. Insurers paid 90.2% of critical illness claims in 2025.
That money might go towards the mortgage, cover the cost of adapting a home, or fund treatment or a slower return to work.
Mortgage protection
Mortgage protection does one job: it pays off your mortgage when you die. The usual approach is decreasing term life insurance. The cover reduces broadly in line with the outstanding loan. If you’re weighing this up against other options, our piece on whether you need mortgage protection insurance sets out the decision in more detail.
Think of financial protection as an umbrella with several panels, rather than one product doing every job. Life insurance covers death. Critical illness cover covers certain serious diagnoses. Income protection covers an extended spell unable to work. They address different risks. Most people need more than one to cover themselves properly.
The right combination depends on your income, debts, savings, employer benefits, family circumstances, and whatever cover you already have. Start with the risk rather than the policy: what would happen if the income stopped, illness struck, or you were no longer around? The gaps tend to become obvious quite quickly once you ask the right question. Our guide to the different types of financial protection is a good next stop, and our protection planning advisers are happy to talk through where your gaps actually are.