A mortgage can run for decades, but a household’s income can change overnight. Illness, a serious diagnosis, redundancy and death create different financial problems, and no single insurance policy necessarily covers them all.
Most homeowners understand the need to insure the building they live in. Buildings insurance is commonly required under the terms of a mortgage because it helps cover the cost of repairing or rebuilding the property following specified events1.
Protecting the property itself, however, is only part of the financial picture.
What would happen to the mortgage if illness prevented one of the household’s main earners from working? Could the family manage after a serious diagnosis, an unexpected redundancy or the death of a partner?
The answers may involve a combination of savings, employer benefits, state support and insurance. Each has limitations, and different protection products are designed to respond to different events.
Understanding those differences is the first step towards building a financial safety net.
Start with four difficult questions
Homeowners should consider what would happen in four separate circumstances:
- illness or injury prevents someone working for a prolonged period;
- a member of the household is diagnosed with a serious medical condition;
- an income is lost through involuntary redundancy; or
- one of the household’s earners dies.
A policy that could help in one situation may provide no benefit in another.
Income protection, for example, is a long-term insurance policy designed to provide a regular income if illness or injury prevents the policyholder from working 2.
Critical illness cover usually pays only when a diagnosis or medical procedure meets one of the definitions in the policy3.
Life insurance ordinarily pays following the death of the insured person, while accident, sickness and unemployment cover is normally designed to provide shorter-term support following specified events4.
No policy should be assumed to cover every reason for losing an income.
Income protection and prolonged illness
Income protection is a long-term insurance policy designed to provide a regular income if illness or injury prevents the policyholder from working2.
It will normally replace only part of the policyholder’s earnings rather than their full salary. Depending on the policy, payments may continue for a fixed claim period or until the policyholder returns to work, retires or reaches the end of the policy term.
Important features include:
- the percentage of earnings that can be covered;
- how the policy defines incapacity;
- the deferred period before payments begin;
- how long a valid claim can be paid;
- medical and occupational underwriting;
- exclusions;
- whether benefits can increase with inflation; and
- whether premiums are guaranteed or reviewable.
The definition of incapacity is particularly important. A policy may assess whether the claimant can perform their own occupation, a suited occupation or, under some contracts, any occupation.
The precise wording will determine when the policy may pay.
Income protection does not normally cover redundancy or general unemployment.
How much sick pay might you receive?
Before considering insurance, employees should check what their employer already provides.
Some employers offer occupational or contractual sick pay above the statutory minimum. This may provide full salary for a period before reducing to half pay or ending.
The amount, duration and eligibility conditions vary. Any entitlement should be checked in the employment contract, staff handbook or workplace benefits policy.
Eligible employees may also receive Statutory Sick Pay through their employer.
For the 2026/27 tax year, the weekly rate is £123.25 or 80 per cent of average weekly earnings, whichever is lower. From 6 April 2026, Statutory Sick Pay became payable from the first full day of sickness absence and the previous lower earnings threshold was removed5.
At the maximum rate, £123.25 a week is equivalent to approximately £534 a month when averaged across a year.
Statutory Sick Pay can generally be paid for up to 28 weeks5. It also applies to eligible employees in Northern Ireland, although the administration of benefits and wider sources of public support can differ across the UK.
Self-employed people do not receive Statutory Sick Pay because it is paid by an employer to an eligible employee. Other support may be available depending on individual circumstances.
Critical illness cover and a serious diagnosis
Critical illness insurance usually pays a one-off lump sum if the policyholder is diagnosed with one of the medical conditions covered by the policy and the diagnosis meets the insurer’s definition3.
The money may be used for any purpose. This could include reducing a mortgage, replacing lost income, funding treatment, adapting the home or meeting other household costs.
Critical illness cover does not pay for every illness.
Policies contain a defined list of conditions and medical criteria. The severity required for a claim can differ between conditions and insurers.
Some policies may make smaller payments for specified less severe conditions. A full claim will commonly bring the relevant cover to an end, although this depends on the contract.
It is therefore important to compare definitions and policy terms, rather than considering only the number of illnesses listed.
Life insurance and those left behind
Term life insurance generally pays a lump sum if the insured person dies during the policy term and the claim meets the policy conditions4.
The payment could be used to reduce or repay a mortgage, replace lost income, meet childcare costs or provide broader financial support for dependants.
There are several forms of cover.
A decreasing-term policy provides an amount of cover that reduces over time and is commonly arranged alongside a repayment mortgage4.
A level-term policy maintains the same amount of cover throughout the agreed term.
Family income benefit is designed to pay a regular income for the remaining policy term following a valid claim, rather than providing the entire benefit as one lump sum.
The appropriate amount of cover may need to reflect more than the outstanding mortgage. Childcare, household expenditure, other debts and the loss of future earnings may also need to be considered.
Life insurance does not generally provide an income simply because the insured person is unable to work.
ASU and mortgage payment protection
Accident, sickness and unemployment insurancecan help with repayments by paying a set amount for a limited period, often up to 12 or 24 months, after a waiting period6.
Depending on the policy selected, it may cover:
- accident and sickness;
- involuntary unemployment; or
- a combination of these risks.
Mortgage payment protection insurance is intended to help meet mortgage payments for a limited period following a covered event. Some policies may also provide an additional amount towards other household costs.
These policies usually pay a pre-agreed monthly benefit after a waiting period and for a limited claim period. MoneyHelper says payment protection policies may pay for periods such as 12 or 24 months, depending on the product6.
Unemployment cover does not insure against every form of job loss.
Exclusions may apply to resignation, dismissal, voluntary redundancy, the end of a fixed-term contract or redundancy that was known or reasonably foreseeable when the policy was taken out.
The risks covered, waiting period, benefit amount and claim duration must all be checked in the individual policy.
Which policy responds to which event?
The main types of protection serve different purposes.
Income protection may provide a regular payment when illness or injury causes a loss of earnings.
Critical illness cover may pay a lump sum following a diagnosis or procedure that meets a covered definition.
Life insurance may provide a lump sum or regular income following the insured person’s death.
ASU or mortgage payment protection may provide short-term monthly payments following specified accidents, sickness or involuntary unemployment, depending on the cover selected.
There can be overlap.
In some circumstances, the same illness could result in valid claims under both critical illness and income protection policies, provided the separate definitions and claim conditions of each contract are satisfied.
Equally, someone could be unable to work because of illness without meeting the medical definition required for a critical illness payment.
For income-based policies, claim payments may also take account of continuing earnings, employer benefits or other income where the policy limits the total proportion of earnings that can be replaced.
Holding several policies does not mean that each will necessarily pay or that every stated benefit will be paid in full.
Check your workplace benefits
Employer-provided benefits can form an important part of the household safety net.
These may include:
- occupational sick pay;
- group income protection;
- death-in-service benefits;
- private medical insurance; and
- employee assistance services.
Death-in-service cover normally applies only while the employee remains eligible under the employer’s scheme. It may end when the person changes jobs or leaves the organisation.
Group income protection and enhanced sick pay may also change or disappear following a change of employer.
Workplace benefits should therefore be checked whenever someone moves role, changes working arrangements or becomes self-employed.
Calculate the household protection gap
The starting point should be the household budget, not an insurance product.
Add up the essential monthly commitments that would continue after illness, redundancy or death:
- mortgage payments;
- council tax or domestic rates;
- utilities;
- food;
- insurance;
- childcare;
- transport;
- minimum debt repayments; and
- other unavoidable expenditure.
Then calculate what income and resources would realistically remain.
These may include:
- employer sick pay;
- Statutory Sick Pay;
- a partner’s income;
- accessible savings;
- workplace benefits;
- possible state support;
- existing insurance; and
- any statutory or contractual redundancy payment, considered alongside how long it may need to support the household.
It can be useful to repeat the exercise for different periods.
A household may be able to manage for three months using savings but face a substantial shortfall after six months or a year.
One policy may not solve every problem
There is no universal combination of protection products that suits every homeowner.
A household with substantial savings and generous employer benefits may decide that additional income protection is unnecessary or choose a longer deferred period.
A self-employed person may place greater importance on protecting income because they do not receive employer sick pay or Statutory Sick Pay.
Parents of young children may consider the financial consequences of death particularly significant, while someone living alone may be more concerned about replacing their own income after illness.
Affordability matters too.
It may be better to prioritise the risks that would have the greatest financial impact than to arrange several policies whose premiums may become difficult to maintain.
Cover will normally remain in force only while required premiums continue to be paid, unless an applicable waiver-of-premium benefit operates under the policy.
Review protection when circumstances change
Protection arrangements should be reviewed following major changes such as:
- buying or moving home;
- increasing the mortgage;
- changing employer;
- becoming self-employed;
- getting married or separating;
- having children;
- taking on additional debt;
- receiving a significant change in income; or
- using a substantial amount of emergency savings.
Existing cover should be checked to ensure the insured amount, term, deferred period and policy structure remain appropriate.
A review does not necessarily mean buying additional insurance. It may confirm that the existing cover is suitable, identify unnecessary duplication or reveal that workplace benefits now meet more of the household’s needs.
The adviser’s view
A mortgage is arranged using the household’s income and circumstances at a particular point in time.
Protection planning considers how the household might cope if those circumstances changed.
An adviser can help establish what support is already available through employment, savings, state provision and existing insurance. They can then identify any potential shortfall and explain which options may be relevant.
Not every household will need every type of cover.
The purpose of a protection review is to identify the financial risks that matter most, understand the limitations of existing arrangements and decide whether those risks should be managed through insurance, savings, workplace benefits or a combination of these.
To review how your mortgage and household finances could be affected by illness, a serious diagnosis, redundancy or death, please contact us.
Should you fail to disclose or misrepresent a fact, then you risk the insurer only paying part of a claim, declining to pay all claim and possibly, declaring the policy invalid.
Your home/property may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.
There may be a fee for mortgage advice. The precise amount of the fee will depend on your circumstances.
Think carefully before securing other debts against your home/property.
The FCA does not regulate some forms of Buy to Lets.
All the information in this article is correct as of the publish date 30th July 2026. The opinions expressed in this publication are those of the authors. The information provided in this article, including text, graphics and images does not, and is not intended to, substitute advice; instead, all information, content, and materials available in this article are for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information.
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References:
- MoneyHelper (2026). What is buildings insurance? | MoneyHelper. [online] Available at: https://www.moneyhelper.org.uk/en/everyday-money/insurance/what-is-buildings-insurance.html[Accessed 28 July 2026].
- MoneyHelper (2026). What is income protection insurance? | MoneyHelper. [online] Available at: https://www.moneyhelper.org.uk/en/everyday-money/insurance/what-is-income-protection-insurance[Accessed 28 July 2026].
- MoneyHelper (2025). What is critical illness cover? | MoneyHelper. [online] Available at: https://www.moneyhelper.org.uk/en/everyday-money/insurance/what-is-critical-illness-cover [Accessed 28 July 2026].
- MoneyHelper (2026). What is life insurance? | MoneyHelper. [online] Available at: https://www.moneyhelper.org.uk/en/everyday-money/insurance/what-is-life-insurance [Accessed 28 July 2026].
- GOV.UK (2014). Work out your employee’s Statutory Sick Pay manually. [online] GOV.UK. Available at: https://www.gov.uk/guidance/statutory-sick-pay-manually-calculate-your-employees-payments [Accessed 28 July 2026].
- MoneyHelper (2026). Can you insure yourself against redundancy? | MoneyHelper. [online] Available at: https://www.moneyhelper.org.uk/en/work/losing-your-job/can-you-insure-yourself-against-redundancy [Accessed 28 July 2026].
