When they do start to pay out, income protection policies all pay out a tax-free income, not a lump sum. This benefit will cease either on your return to work or the expiry of the benefit period.

Policies are normally structured so that it is not possible to be better off while out of work and receiving income protection payments than when in work and getting paid. No matter how many income protection policies you take out, you will not normally be able receive more than 65% of your previous year's average income level from the policies. If you could double your salary by being ill, it would not be a great incentive to go back to work.

Before you rush buy an income protection policy, you should find out from your employer whether they will pay non-statutory sick pay, and if so, for how long. This may influence your decision about how long the deferral period should be on any policy that you do end up purchasing. You may get full pay for a while, so this should be equal to the deferral period. The benefits you receive from your employer or pension scheme may not be taken into account when the insurer calculates what your maximum benefit is. They are more likely to take into account state benefits, so you may end up receiving 65% of your salary minus whatever your entitlement is from the welfare system.

Most companies have a ceiling on the maximum level of benefit that they are prepared to pay out. This can be over £100,000 per year, so even high earners can benefit from taking out this sort of policy.

Finally, you do not have to choose a policy with a fixed benefit payout. If you buy a policy with a fixed level of benefit, what happens if your salary rises? You should consider getting a renewable policy, especially if you are still progressing in your career and you anticipate future rises in earnings. The other point to remember here, is that inflation erodes the value of money over a period of time. £20,000 is extremely unlikely to be worth as much in twenty years as it is today. To cope with this, insurers offer benefits that are index-linked. This means that the level of benefits paid out if you become unable to work will rise broadly in line with inflation.