• Income Protection

    Have you considered what could happen if you suddenly couldn’t work due to a severe illness or bad accident? We share everything you need to know in our guide to income protection for self employed people. 

  • Income Protection

    Have you considered what could happen if you suddenly couldn’t work due to a severe illness or bad accident? We share everything you need to know in our guide to income protection for self employed people. 


A Guide to Income Protection for Self Employed People.

Have you considered what could happen if you suddenly couldn’t work due to a severe illness or bad accident? We share everything you need to know in our guide to income protection for self-employed people.

Starting up your own business or contracting is higher risk than your standard 9-5 job. The chances are you’ll have to be a jack of many trades, work longer hours and vie for new clients – it’s likely to be more stressful, but the reward of working for yourself can be plentiful.

However, if you’re planning to make this transition, you will also have to think about things like how you’ll cope if you are diagnosed with long term illness or are left unable to work as the result of an accident. Could you afford it? Would you be able to afford any business outgoings if you had little to no savings?

If the answer is no, then you’re likely to need income protection insurance.

What is Income Protection Insurance?

Income protection, simply put, is a form of insurance to help guard you against financial hardship in the event of experiencing an accident or illness that leaves you unable to work over the long term. Income protection isn’t exclusive to people who run their own businesses, however, those who are self-employed are the most likely to need it without any sort of workplace sick pay.

How does it work?

Typically, the insurance works by paying out in regular tax-free instalments over a defined period for as long as you are unable to work. This may be until retirement until your policy runs out or until your death – whichever comes first. Income protection insurance is usually paid out over the longer term, but shorter-term policies are also available, and the cost can be cheaper.

Depending on your policy, it is also likely you’ll be able to make multiple claims on your insurance for shorter periods of illness, provided you return to work and meet the conditions of your policy to claim again.

What income protection insurance is very unlikely to cover is unemployment if you are self-employed. If you were to attempt to make a claim for this, it is unlikely income protection would payout as you would have to prove any loss of business was beyond your control – an issue, of which, would be very hard to argue as the owner of the business.

An income protection policy is likely to cover between 50-70% of your earnings, before tax. Each provider is different, and depending on your policy the amount of time you’ll need to wait before making a claim varies too.

Some income protection insurance providers will work out what you are owed based on your average income – from anywhere between 12 months to three years. So, if you’ve increased your salary within the year, then you may not receive as large of a payout as you had been expecting. Make sure to check with your provider!

How much cover do I need?

Choosing how much cover you need will be down to your individual circumstances, however, it is wise to never take out more cover than you need. When considering how much cover you need, consider things like: 

• Exactly how much you could get by on – consider your regular monthly outgoings such as mortgage payments, food costs, electricity and gas – what would these cost you? If you’re able to insure only 50% of your earnings and get by compared to 70%, then your premiums are likely to be considerably cheaper and a wider range of attractive policies available to you. 

• Supporting any dependents you have. Are costs like childcare likely to rise if you become unwell over a long period of time? If this is the case, you may wish to obtain more cover, rather than less.

• If you also have any other protection already in place, like Critical Illness Cover If you already have existing cover, you may be able to take less cover – but the best thing to do in this instance is consult one of our independent advisors, who will be able to help explain your options. 

Choosing an Income Protection Policy

When choosing your policy, it’s important to consider all aspects to get the right amount of cover, at the most affordable price. With so many products on the market, choosing the right income protection insurance can be an overwhelming experience. Not to worry though – just get in touch and one of our impartial advisors will be delighted to help you, free of charge. 

The Finer Detail

Like with any insurance policy, the finer details are the most important. When considering income protection insurance, there are different types of premiums to consider: Reviewable, Guaranteed, Age-related.

One of the most preferred, for it’s reliability, is a guaranteed policy as your premiums won’t unexpectedly rise. This won’t always appear to be the cheapest policy on the face of it, but if you are planning to have income protection insurance over the longer term, this could work out to be much more cost-effective. 

Reviewable policies will appear initially cheaper, however due to the nature of the policy, premium increases can be expected once out of your initial defined period. Age-related policies will also appear to be cheaper, but the premium will increase as you get older. The premium increases for age-related policies won’t come as a surprise as they will be outlined from the beginning, however, when considering your future financial planning, compared to a guaranteed policy, you may end up worse off. 

Another area to pay attention to when considering income protection insurance is policies that are “own occupation.” Own occupation policies refer to insurance that will cover the holder if they are too unwell to carry out any part of their job. Therefore, for people considering this type of policy, it is important to get the definition of your occupation correct the first time. 

Other policies can cover “any occupation” but there is an increased risk as there is less likelihood of a payout. For instance, your policy will only payout if you are unable to carry out daily living activities, so if you are in a job involving manual labour and you suffer a broken bone or sprain, your policy may dictate that you can still carry out other actions, such as working at a desk, even although you are not able to carry out your existing job, and therefore will not pay out. 


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