Life can be unpredictable and an unexpected illness, injury or bereavement can have a significant impact on both our lives and our finances.
Life can be unpredictable and an unexpected illness, injury or bereavement can have a significant impact on both our lives and our finances. While it's not always comfortable to think about these situations, understanding the role of financial protection can help us appreciate how insurance may provide support when it's needed most.
According to the Association of British Insurers (ABI), insurers paid out £7.84 billion in individual and group protection claims in 2025. That's equivalent to approximately £21.5 million every day, highlighting the role protection insurance plays in supporting individuals, families and employees across the UK.
From life insurance and critical illness cover to income protection, these policies can provide financial support when people face challenging circumstances. But what do the latest figures tell us about protection insurance, and why is it worth understanding the different types of cover available?
Protection Insurance: What Do the Latest Figures Show?
The ABI's research found that 97.9% of individual protection insurance claims resulted in a payout in 2025.
During the year, insurers paid £5.15 billion in individual life insurance, income protection and critical illness claims. Although this was 3% lower than in 2024, it was 22% higher than in 2022. The average individual protection claim payout was £19,300, representing a 2% increase on the previous year.
These figures demonstrate the scale of financial support provided through protection insurance.
Different policies are designed to provide different types of support. Life insurance can provide a payment following the death of the person insured, subject to the policy terms. Critical illness cover can provide a lump sum following a diagnosis that meets the policy's definition of a covered condition. Income protection can replace some of a person's income if they are unable to work because of illness or injury, subject to the terms of the policy.
Understanding these differences is an important part of learning how protection insurance works and the circumstances in which it may provide financial support.
Rising Workplace Absence Highlights the Importance of Income Protection
Being unable to work because of illness or injury can affect more than just your health. For many people, a prolonged absence from work can also create financial uncertainty, particularly when regular household expenses continue.
Research from WTW has highlighted growing concerns around employee absence in the UK. Its findings indicate that many employers have experienced increases in both short-term and long-term absence, with mental health, workplace stress, musculoskeletal conditions and chronic illnesses among the issues affecting employees.
This is particularly relevant when considering income protection insurance.
Income protection is designed to provide a regular benefit if someone becomes unable to work because of illness or injury and meets the policy's claim requirements. Depending on the policy, payments may help towards everyday expenses while the individual is unable to earn their usual income.
The level of cover, waiting period before payments begin, benefit period and other conditions vary between policies.
Understanding how income protection works can help people become more familiar with the financial considerations associated with an extended absence from work.
Mental Health & Income Protection Claims
Mental health is an increasingly important consideration in conversations about workplace wellbeing and financial security.
Conditions affecting mental health can sometimes prevent people from working, just as physical illnesses and injuries can. When this happens, the impact may extend beyond an individual's wellbeing to their income and household finances.
According to the ABI's 2025 protection claims figures, insurers paid £39 million in income protection claims relating to mental health conditions, accounting for 19% of all income protection claims paid.
These figures highlight the role that income protection can play in supporting people experiencing a range of health conditions.
Policy definitions and eligibility requirements vary between insurers, so the circumstances in which mental health conditions are covered will depend on the individual policy.
It is also worth remembering that insurance is only one part of the wider support available. Access to appropriate healthcare, workplace support and rehabilitation services can all play a role in helping people manage their health and, where possible, return to work.
How Income Protection Can Support a Return to Work
Income protection is not solely about providing financial support while someone is unable to work. Depending on the insurer and policy, additional services may also be available to help individuals manage their recovery.
The ABI reported that 7,600 people who had made an income protection claim were able to return to work with support from their payouts and other health services provided by their insurer.
Some protection policies include access to rehabilitation services, specialist support or other resources designed to help people manage their recovery and return to work when appropriate.
Employer-provided group protection schemes can also play a role in supporting employees.
For businesses, group income protection may provide financial benefits to eligible employees who are unable to work due to illness or injury. Depending on the arrangement, additional rehabilitation and wellbeing services may also be available.
The precise benefits depend on the policy and scheme in place.
These arrangements demonstrate how protection can form part of a broader approach to financial wellbeing, supporting individuals during periods when their health affects their ability to earn an income.
Why Is Financial Protection Important?
Financial protection can play a role in helping individuals and families manage the financial consequences of unexpected life events.
For example, the death of a family member may have implications for household income, mortgage commitments and future financial plans. A serious illness could result in additional expenses, while an extended absence from work may affect the ability to meet regular outgoings.
Different types of protection insurance are designed to address different circumstances:
- Life insurance: Can provide a payment following the death of the person insured, subject to the policy terms.
- Critical illness cover: Can provide a lump sum if the insured person is diagnosed with a specified condition that meets the policy's definition.
- Income protection: Can provide a regular benefit if the insured person is unable to work due to an eligible illness or injury and satisfies the policy requirements.
- Group protection: Employers can arrange certain protection benefits for eligible employees, depending on the scheme.
Each type of cover has its own purpose and benefits, exclusions, limits and eligibility requirements vary.
Understanding the differences can help people become more informed about the role protection insurance may play alongside other aspects of their financial arrangements, including savings, pensions and retirement planning.
Understanding Your Financial Protection Options
Protection insurance can be an important part of the wider financial landscape, helping provide financial support when life takes an unexpected turn.
As the latest industry figures demonstrate, these policies provide substantial support to individuals, families and employees across the UK each year.
At Chrysalis Wealth Management, we understand that everyone's financial circumstances and priorities are different. Alongside retirement planning, pensions, savings and investments, protection is an important area of financial planning to understand.
If you'd like to learn more about the financial planning and protection services we offer, get in touch with our friendly team to find out more.
