Is Income Protection for the Self Employed Important?
Being self employed comes with a long list of benefits however, one of the downsides is that you don’t get financial security of employees benefits such as sick pay.
This is where income protection can be vital to someone who is self employed, giving people the peace of mind that if they were to become ill or injured, they will still have an income to pay the bills and mortgage payments.
What is income protection?
Income protection is a policy that will pay out if you were unable to work due to having an illness or suffering from an injury.
An income protection policy isn’t limited to self employed people however, it’s highly popular amongst them as they don’t have the same employee rights as PAYE workers and that includes statutory sick pay.
As a self employed worker, you may be able to claim an Employment and Support Allowance to help with living costs if you were faced with health issues that prevent you from being able to work. Adults aged over 25 could receive a maximum of £114.10 a week, depending on their circumstances. That £114.10 a week may not be enough to cover all your household bills.
This is where Income Protection steps in, this protection can ensure that financial commitments are covered. You can receive around 50%-70% of your monthly income, tax free.
What is the cost of income protection insurance?
The amount that you will pay for income insurance will depend on a number of different factors such as:
- What you do for a living and the risks involved in your job. For example, if you’re an electrician who is working on building sites, you are going to be at a higher risk compared to a self employed marketing consultant who is working from home.
- Your age will be considered, the older you are the more likely you are to become ill or suffer an injury.
- If you have any existing medical conditions that might make you more likely to claim.
- The level of cover that you need based on your average monthly income. As the more you earn, the more the insurer will potentially have to pay out if you were to claim.
- How long you would like your policy to last – shorter term covers can cost less.
- How long your deferral period is – the longer you can wait, the less you pay in premiums.
Deferral period: how long you have to wait after you claim before you receive your first payment.
What’s the difference between income protection and critical illness cover?
These two insurance protection policies are quite different. Income protection will pay a percentage of your salary as regular payments until you return to work and can be used if you’re too ill to work or injured.
Critical illness is usually a lump sum payment if you were diagnosed with a critical illness that is covered in your policy and it is unlikely to cover you if you were injured (e.g a broken arm).
If you choose to have Income Protection and Critical Illness cover, you can claim on both insurance policies as long as both claims are valid and meet the criteria of your policies.
If you wish to find out more about income protection or any other type of insurance product, don’t hesitate to get in touch with a member of our team today. Call us on 01270 443510 or complete our enquiry form and a member of our team will be in touch with you as soon as possible.