Income Protection Insurance for the Self-employed

If you're one of the 4.4 million self-employed workers in the UK, you may be wondering if you can get income protection insurance.[1] The good news is that income protection can indeed cover you if you're self-employed.

Being self-employed comes with many benefits, like flexibility and tax breaks, but it also means you don’t have access to employee benefits like sick pay. In this guide, we’ll explain how income protection insurance works for self-employed people and why it may be worth considering.

How self-employed income protection works​

If you own income protection, the policy will provide a regular monthly payment in the event you are unable to work due to illness or injury. Payments are typically made until you recover and can return to work, reach the policy's time limit, or once you retire.

Payments should begin once your claim is accepted. However, there is a waiting period (also known as a "deferred period") before you can receive the first payout.

Most policies tend to pay out between 50% and 70% of your income, tax-free.

There are two main types of cover to choose from:

• Short-term income protection, which covers you for a set amount of time, usually between 1 to 2 years, depending on the policy. If you make a claim, you'll receive monthly payments until either you return to work or the policy reaches the end of the term (whichever comes first).
   

• Long-term income protection, also known as "permanent health insurance," provides cover for an extended period, often until you reach retirement age, or until the conditions of your policy specify that payment stops. This type of policy is beneficial if you're unable to work for a long time or even if you never work again.

Most policies will allow you to claim multiple times on a policy should you have an accident or illness again.

Please note: Income protection insurance offered by Cavendish Online has no cash-in value at any time. If you stop paying your premiums, your cover will stop, your policy will end, and you will receive no benefit. If you have not claimed before the end of your chosen policy term, the policy will end, and no benefit will be paid.

What does self-employed income protection cover?

income protection can cover a whole range of financial burdens that could arise while you're unable to work.

When you’re self-employed, you still have monthly expenses such as rent or mortgage payments, utility bills, groceries, and other essential costs. These can be covered by your policy as well as business expenses, including salaries for your employees.

It could also help to cover personal loans, credit card bills, or business-related debts, which could be hard to manage whilst your income is disrupted.

Why buy self-employed income protection?

As a self-employed worker, you handle the sole responsibility for your income. Should you become sick or injured, you may not have any sick pay or financial backup to support you. This could lead to significant financial strain on your family and your business.

income protection insurance can provide a ton of benefits for the self-employed, such as:

• Financial security to help you meet ongoing financial commitments, such as mortgage payments, rent, and bills.
   

• Financial support to allow you to focus on your recovery without falling into debt.
   

• Flexible cover options tailored to fit your unique circumstances.
   

• Protection for your business to maintain expenses or hire temporary help.
   

• Peace of mind knowing that you have a financial safety net in place.

How much does self-employed income protection cost?​

Similar to life insurance, the cost of income protection depends on a range of factors such as:

• Your occupation - High-risk professions, could lead to higher premiums due to the increased likelihood of accidents or health issues.
   

• Your age and health - Younger individuals typically pay less for cover as the risk of illness or injury generally increases with age. Having a pre-existing health condition may also affect the cost and terms of your policy.
   

• Amount of cover - The higher the monthly benefit you wish to receive in the event of a successful claim, the more you'll likely pay in premiums. The same applies to the level of cover you choose.
   

• Waiting period - Policies often allow you to select a waiting period, which is the amount of time you must be unable to work before you start receiving benefits. A longer waiting period typically results in lower premiums.
   

• Policy term - The duration of your coverage can affect the cost, too. A policy that pays out for a limited time may be less expensive than one that covers you until retirement age.

Other types of protection to consider

As a self-employed person, the need for protection is even greater. While income protection does a great job of protecting your income, there are other types of insurance cover that you should consider for comprehensive protection for both your family and your business.

Life insurance

Life insurance pays out a cash lump sum to your loved ones in the event of death. If you're self-employed and have dependants it can provide them with a replacement of your income covering other expenses such as mortgages and funeral costs.

If you're a homeowner, mortgage life insurance could help to make sure your family aren't left with the burden of making any remaining payments in your absence.

Critical Illness Insurance

Critical illness insurance provides a one-time payout if you are diagnosed with a serious illness, such as cancer, heart disease, or stroke. This type of cover can be valuable if you're self-employed as it offers financial support during recovery, allowing you to focus on health rather than finances.

You can get an income protection quote from Cavendish Online by speaking to an expert adviser over the phone, with no upfront fees. Call today to get started.

[1]https://www.statista.com/statistics/318234/united-kingdom-self-employed/