Allan May from specialist life insurance adviser, Cavendish Online, says:
It’s very natural that you’re having these worries. Being self-employed can be stressful at the best of times, but I imagine even more so given the current climate. The financial support being offered by the government is helping a huge number of people, both employed and self-employed, but it is true that not everyone will be eligible.
You’re right to consider whether insurance could help you here. Critical illness cover and income protection insurance are both products that cover you if you fall ill, but each product treats coronavirus slightly differently.
Do both types of insurance cover coronavirus?
Critical illness policies don’t currently include coronavirus as a specified illness, so in the unfortunate event that you contracted the virus, it’s unlikely that you’d qualify for a payout from your policy. There would, however, be the possibility of a payout if the virus lead to you developing other complications such as kidney, liver, heart or respiratory failure.
As always with insurance, it’s important to carefully check the policy’s terms and conditions which will explain exactly what conditions are covered.
It’s also worth being aware that most critical illness policies are in fact purchased with life insurance attached. So, if the worst were to happen, and you sadly passed away as a result of COVID-19, your family would likely receive a payout from the policy.
Income protection policies will typically pay out for any illness or injury that means you need to take time off work. So, if you were to develop coronavirus and became too ill to work, your income protection policy should pay out your monthly benefit as normal.
It’s important to know that income protection policies come with a deferred period, which is the point at which you start receiving monthly payments from your policy. If you buy an income protection policy with a long-deferred period, say three months, and then catch coronavirus, you may actually recover before the end of that three-month period, and therefore not receive a benefit payment from your policy.
Will I still need my policy when coronavirus is over?
The simple answer is yes.
Even though it is completely understandable to be worried about coronavirus at the moment, it is always important to think more broadly when considering your insurance needs. There are lots of other reasons and other major illnesses that might mean you’re unable to work in future. Being self-employed may also put you in a slightly riskier situation, simply because you don’t have the support from an employer to rely on.
Both income protection insurance and critical illness cover exist to provide a financial safety net for you and your family. They are designed to protect the people you love and can provide you with a valuable sense of security.
With more time at home in the weeks, if not months, to come, perhaps you have an opportunity to think more broadly about your insurance needs, which will exist long after the coronavirus has run its course.