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Self Employed Income Protection

Protect your income from unexpected illness or injury with Self-Employed Income Protection, simplifying financial risks for business owners.

Our helpful Guide on Income Protection cover for Self-Employed Professionals has been written to help you take control of your future financially. This guide takes you through everything you need about income protection, from understanding the basics to choosing your insurance requirements. Speak to our fee free protection advisers for free advice on the best cover for you.

Self Employed Income Protection Guide
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    What is Income Protection Insurance?

    Income Protection Insurance acts as a buffer by ensuring that it pays a proportion of your earnings if illness or injury prevents you from working. It is capable of helping you out during your recovery period since, unlike most lump sum policies, this type of policy gives out regular payments that are non-taxed, hence maintaining the quality level that you were leaving before falling sick. This plan can be customised depending on what you do for a living and how much responsibility you have.

    Why Should Self- Employed People Consider Cover?

    Income uncertainty significantly affects self-employed people, who lack the safety nets like employer-subsidised healthcare and sick pay available to permanent employees. This gap exposes them to greater financial risk in case of unexpected health issues. Unlike other policies, income protection insurance offers a crucial difference: it covers expenses during ill health, ensuring financial obligations are met, whether or not you can work. This continuous coverage provides security and peace of mind, maintaining financial stability without the pressure to return to work prematurely.

    Key benefits of income protection insurance for self-employed individuals include:

    • Continued Income Stream: Provides a regular, tax-free income to cover your living expenses and maintain your lifestyle.
    • Business Operations: Helps manage business expenses, ensuring your enterprise can sustain or pause operations without financial strain.
    • Flexible Coverage: You can tailor your policy to suit your specific needs, choosing how much coverage you require and when it begins.
    • Mental Peace: Reduces stress and financial worry, allowing you to focus on recovery without the pressure of immediate work return.
    • Adaptability: Adjust your coverage as your business grows or circumstances change, ensuring you’re always protected.

    How Does Income Protection Insurance Work?

    Income protection cover is tailored to an individual’s needs, considering their job, income, and desired security level. After choosing a plan, you pay monthly premiums. If you cannot work due to illness or injury, you’ll receive income after a “deferral period.” Extending this period can reduce premiums. Payments last until you can work again, retire, or in certain plans beyond covering disabilities during the policy or providing support posthumously until the policyholder has turned 65.

    income protection for self employed

    Key Features of Income Protection Policies

    Income Protection Policies provide a safety net, ensuring financial stability during periods you cannot work due to illness or injury. Key features include:
    • Regular Payments: Income protection insurance pay a monthly tax-free monthly income, typically a percentage of your pre-illness earnings, to support your financial needs.
    • Adjustable Cover: You can tailor the coverage amount, policy term, and waiting periods to suit your situation.
    • Occupation Coverage: Policies are often customisable based on the risk level of your occupation, providing more personalised protection.

    Types of Income Protection Insurance

    There are various types of income protection insurance, each catering to different needs and situations:
    • Short-Term Policies: These offer coverage for a limited period, usually between one to five years, and tend to have lower premiums.
    • Long-Term Policies: Offering protection until retirement, death, or return to work, these policies provide more comprehensive coverage.
    • Age-Related Policies: Premiums are based on age and health, adjusting as you age.

    Coverage Details: Accident, Sickness, and Unemployment

    Income protection policies cover a range of scenarios:
    • Accident and Sickness: Provides a replacement income if you cannot work due to illness or injury.
    • Unemployment Cover: Some policies offer additional protection if you’re made redundant, helping cover expenses while you seek new employment.

    Critical Illness Cover in Self-Employed Income Protection

    Critical illness insurance can be added to or included within some income protection policies, offering a lump sum if you’re diagnosed with a specific serious illness. This is particularly valuable for self-employed individuals, providing financial support during long-term recovery.

    Mortgage Payment Protection Insurance (MPPI) Explained

    MPPI is explicitly designed to cover your mortgage payments if you cannot work due to an accident, sickness, or unemployment. As a homeowner, this type of short-term income protection cover can be extremely useful by ensuring you do not fall behind on your mortgage repayments during illness.

    Statutory Sick Pay (SSP) Eligibility for the Self-Employed

    The government does not give SSP to self-employed persons, unlike workers. This is why individual income protection is necessary to ensure financial compensation even when one has left work due to illness or other health-related reasons.

    Choosing Your Income Protection Plan

    When you are a self-employed person, getting the right income protection plan is crucial as it guarantees your financial future, especially during unforeseen health setbacks. You can decide by considering several aspects so that you may be sure that this insurance policy suits your situation and gives you peace of mind.

    Essential Policy Considerations Before Signing Up

    Some vital issues must be carefully examined before buying any income preservation policy to ensure that such policies adequately suit your needs. These considerations are building blocks in selecting plans compatible with your financial obligations and career path while shielding your earnings from possible interruptions.

    • Deferral Period: Choose a waiting period that reflects your financial reserves before your policy pays out, impacting your premium cost.
    • Coverage Amount: Assess your lifestyle and financial obligations to determine the income percentage you need to replace.
    • Policy Terms: Look for terms regarding policy adjustments, renewability, and cancellation options as your life and work evolve.

    Understanding Policy Payout Duration

    The duration of policy payouts varies and should be a major consideration in your decision-making process. Opting for the right duration can ensure you have support when most needed, whether for a short recovery period or longer-term incapacity.

    • Short-term policies offer quick, temporary support, providing coverage for one or two years.
    • Long-term policies ensure financial stability up to retirement, ideal for more serious conditions that require extended recovery time.

    Fixed Premiums vs. Age-Banded Premiums

    Deciding whether to use fixed premiums or age-banded premiums is a significant financial choice that has advantages depending on your age at the time of purchase, your financial planning style, and your future costs.

    • Fixed Premiums provide predictability throughout the policy, remaining unchanged.
    • Age-Banded Premiums start low but rise with age, possibly becoming more expensive.

    Determining Your Coverage Needs: How Much is Enough?

    It is important to decide on an appropriate amount of cover to ensure you do not overburden yourself with premium payments while providing substantial financial support from a policy. Balancing this point is critical for sustaining a lifestyle and achieving wealth objectives, even in trying moments.

    • Monthly Expenses: Calculate your essential living costs to ensure the policy covers your basic needs.
    • Future Financial Goals: Consider ongoing contributions to savings or investments your income supports.
    • Debts and Obligations: Include financial commitments like mortgages or loans in your coverage calculations.

    The Tax Implications: Is Income Protection Deductible?

    Within the self-employment context, understanding tax implications around income protection insurance can affect premium cost and benefits received by an individual at various life stages.

    • Business Expense: Depending on local laws, premiums might be deductible as a business expense, which could lower your taxable income.
    • Benefit Taxation: Benefits from income protection policies are typically received tax-free, although this can vary based on policy structure and premium payment methods.

    Knowing these finer details about income protection schemes empowers you to make informed decisions, thus providing reliable safeguards against salary gaps due to ill health problems, such as crises caused by accidents/illnesses.

    Ready to Protect Your Income?
    Safeguard your income against unexpected setbacks. Our experts offer 100% FREE advice tailored to your unique business needs, ensuring you choose the right protection. Take control of your financial future today!

    Policy Management and Claims

    Effectively managing your income protection policy and understanding the claims process is critical to assuring you have financial backing when required. This section explains how to claim, what constitutes a valid claim, how to manage bouts of temporary sickness, and the importance of the deferral period in your cover.

    The Claim Process: Ensuring a Successful Payout

    Navigating the claim process successfully is crucial to accessing your income protection policy benefits. It entails timely notification of the insurer about your illness or injury, detailed documentation, and compliance with policy terms. Below are some tips on how you can improve your chances of a successful claim:

    • Prompt Notification: Inform your insurer to initiate the claim process as soon as possible.
    • Documentation: Gather comprehensive medical evidence and other required documents to substantiate your claim.
    • Policy Terms Compliance: Ensure your claim aligns with the terms of your policy, including any specific conditions or exclusions.

    What Constitutes a Valid Claim?

    Understanding what constitutes a valid claim can help you navigate the complexities of income protection insurance. A valid claim typically meets the following criteria:

    • Covered Conditions: The illness or injury must be within the scope of conditions covered by your policy.
    • Proof of Income Loss: You must demonstrate that your ability to earn an income has been affected.
    • Medical Evidence: Submitting detailed medical documentation proving your inability to work is crucial.

    Navigating Short-Term Sickness and Business Downturns

    Dealing with short-term sickness or a temporary downturn in business can be challenging for self-employed individuals. Your income protection policy can be a valuable resource during these times, provided you understand its terms:

    • Short-Term Coverage: Some policies offer benefits for short-term illnesses, bridging the gap until you can return to work.
    • Business Downturns: While income protection covers illness or injury, it’s important to have a financial strategy for handling business fluctuations unrelated to health.

    Understanding the Deferral Period

    The deferral period, or waiting period, is a critical component of your income protection policy that affects both your premium costs and when you can start receiving benefits:

    • Choosing Your Deferral Period: A longer deferral period generally results in lower premiums. Select a period that aligns with your financial reserves and risk tolerance.
    • Impact on Claims: Understanding the timing of your policy’s benefits can help you plan financially for periods of illness or injury, ensuring you’re covered until you can begin claiming benefits.

    Effective policy management and a thorough understanding of the claims process are indispensable for maximising the benefits of income protection insurance, which provides peace of mind and financial stability when you need it most.

    Financial Considerations and Costs

    Self-employed people need to manage their finances and understand income protection insurance costs. Are there fixed or variable premium sections? What determines the cost of income protection cover? Why should one evaluate the risk of disease or injury? And how can one safeguard fluctuating monthly wages?

    Are Premiums Fixed or Variable?

    Income protection insurance premiums can be either fixed or variable, affecting how you plan and budget for this expense:

    • Fixed Premiums offer the security of a constant rate over the policy’s lifetime, simplifying financial planning and ensuring no unexpected increases.
    • Variable Premiums may change based on factors such as age, health status, or insurer’s pricing adjustments, potentially offering lower initial costs but with the possibility of increases over time.

    Understanding the nature of your premiums is essential for long-term financial planning, especially when balancing the other costs of being self-employed.

    The Cost of Self-Employed Income Protection

    The cost of income protection insurance in the UK varies based on personal and policy factors. It can range from £6 to £75 per month. It is influenced by several factors:

    • Occupation and Risk Level: Jobs with higher physical risk may incur higher premiums.
    • Health and Lifestyle: Personal health and habits like smoking can impact premium costs.
    • Coverage Level and Terms: The premium is also determined by the amount of coverage and the policy’s specifics, including the deferral period.

    When choosing a policy, weighing the cost against the potential benefits is important, ensuring it fits within your financial plan without compromising on necessary coverage.

    Evaluating the Risk: Illness and Injury Statistics

    Understanding the statistical likelihood of illness or injury in your profession can determine whether income protection insurance is worth the investment. Consider:

    • Industry-Specific Risks: Certain sectors have higher incidences of work-related illnesses or injuries.
    • Personal Health History: Your own health background may increase your risk profile.

    This evaluation helps determine the coverage level needed to adequately protect against potential income loss.

    Protecting Variable Monthly Earnings

    For self-employed professionals with fluctuating incomes, protecting your earnings requires a tailored approach:

    • Flexible Policies: Look for policies that offer flexibility in coverage, allowing for adjustments based on your income variations.
    • Benefit Payout Structure: Some policies allow you to adjust the benefit amount you receive based on your income at the time of the claim, ensuring that you are adequately covered even if your earnings fluctuate.

    Considering these financial aspects and costs is crucial for self-employed individuals seeking to safeguard their income with protection insurance. It ensures that the chosen policy provides the necessary support, aligning with both short-term needs and long-term financial goals.

    Ready to Protect Your Income?
    Safeguard your income against unexpected setbacks. Our experts offer 100% FREE advice tailored to your unique business needs, ensuring you choose the right protection. Take control of your financial future today!

    Additional Considerations for Self-Employed Professionals

    There are plenty of things to think about when picking the correct kind of security for independent professionals; these comprise more than simple policy coverage and cost issues. This part explores the differences between income protection and sickness insurance, highlights the importance of assessing your need for income protection, explains the typical payout timelines, and addresses common business operations and health concerns.

    Comparing Income Protection and Sickness Insurance

    Understanding the distinctions between income protection insurance and sickness insurance is crucial for making an informed decision:

    • Income Protection Insurance offers a continuous payment to cover lost income during long-term illness or injury, focusing on replacing a portion of your earnings until you can return to work or the policy expires.
    • Sickness Insurance, often providing shorter-term coverage, typically offers a lump sum or limited duration payments for acute illnesses or injuries, not necessarily tied to your ability to work.

    Choosing between these depends on your financial stability, the nature of your work, and how long you can sustain yourself without income.

    The Need for Income Protection: Assessing Your Situation

    Deciding whether you need income protection insurance involves a personal assessment of your financial situation and risk tolerance:

    • Emergency Savings: Evaluate your current savings and whether they can sustain you during unexpected illness or injury.
    • Dependents: Consider the financial needs of those who depend on your income.
    • Business Continuity Plans: Assess how your business would fare in your absence and whether you have any passive income streams.

    This assessment will help you determine the level of coverage necessary to ensure financial stability.

    When Does Income Protection Typically Pay Out?

    Income protection policies have predefined conditions for when they start paying out, which is crucial for planning:

    • Deferral Period: After making a claim, there’s typically a waiting period (deferral period) before payments start, chosen based on how long you can manage without the policy’s support.
    • Medical Assessment: Payments usually begin once a medical assessment confirms you cannot work due to illness or injury, according to the terms of your policy.

    Understanding these conditions ensures you’re prepared for the financial implications of waiting periods and the process involved in starting your benefits.

    Addressing Common Concerns: Business Failure, Short-term Illness, and More

    Self-employed professionals often face unique challenges that can impact their need for and management of income protection:

    • Business Failure: Income protection covers illness or injury impacting your ability to work, not business failure due to market conditions or other factors.
    • Short-term Illness: While some policies cover short-term illnesses, others may only kick in for long-term conditions, underscoring the importance of clearly understanding your policy’s terms.
    • Flexibility and Scalability: As your business grows or your situation changes, consider whether your income protection can adjust to meet evolving needs.

    Considering these additional considerations helps ensure that self-employed professionals choose the right income protection strategy to safeguard against the unpredictable and maintain financial security and business continuity.

    income protection self employed

    Finding the Right Income Protection Provider

    Self-employed professionals in the UK must select the most appropriate income protection provider. The market is wide, and different players have different features, benefits, and premiums. Therefore, its advisable to compare income protection insurance with multiple providers and this can be done with help of an insurance broker like YesCanDo Money.

    Who Offers the Best Income Protection for Self-Employed in the UK 2024?

    Several mortgage providers offer the best income protection for self-employed professionals in the UK. All of these have unique offers catering to various needs and wants.

    British Friendly

    It has taken over a hundred years for British Friendly Society (BFS) founded in 1902 to become one of the major players among friendly society organisations in the UK with more than 30,000 members and assets worth nearly £100m. BFS is known for its flexible policy and claim terms, which allow policyholders to adjust their coverage according to their situation, making them good candidates for anyone who wants income protection that can be customised.


    One of the biggest insurers in the UK, Aviva provides many different types of financial services, such as very flexible income protection insurance plans. Aviva excels at this because it covers people aged between 18 and 59 on up to 65% of their usual earnings. The short-term or long-term options you need are available, meaning you may select a benefit amount from £500 up to £1,500 per month.

    Legal & General

    Legal & General offers an extensive maximum monthly benefit within its feature-rich income protection product. It focuses on providing “own occupation” cover for low-risk roles only. This bias ensures appropriate coverage is received by those engaged in lesser hazardous jobs; however, high-risk occupations might not get covered, thereby showcasing L&G’s directed approach towards IP.


    This firm has Defaqto five-star rated income protection policies demonstrating its top-quality service delivery. LV= products are meant to protect your way of life when illness or accident renders you incapable of carrying out your duty. Prioritised payments by LV= were made available after January 2017, enabling customers whose job was lost involuntarily to have six months’ premium paid.


    Vitality believes strongly in health promotion along with financial security; hence, it provides life assurance plus health insurance and income protection, among others. This is in line with the innovative approach to insurance and personal well-being, which underlies its mission supported by Discovery, its parent company, to make 20% of one hundred million persons more active come 2025.

    All these providers have something unique to offer and are tailored to meet the needs of self-employed individuals in the UK. When selecting an income protection policy that works for you, consider flexible policies, coverage alternatives, and other benefits that align with your personal and professional situations.

    Life Insurance Considerations for First-Time Homeowners

    For first-time homeowners, combining life insurance with income protection can provide a comprehensive safety net:

    • Mortgage Protection: Ensure that your life insurance coverage is sufficient to pay off your mortgage, safeguarding your home for your dependents.
    • Policy Integration: Some providers offer integrated policies covering life insurance and income protection, potentially simplifying management and reducing costs.
    • Long-Term Planning: Consider how your insurance needs may evolve as you pay your mortgage and your family’s financial situation changes.

    Incorporating life insurance into your financial planning ensures that your home and family are protected, even in the worst-case scenario.

    Final Thoughts: Tailoring the Policy to Your Needs

    Customising your income protection policy ensures that you have comprehensive coverage that meets your specific needs as a self-employed professional. This customisation is crucial for creating a financial safety net that aligns with your income level, lifestyle, and long-term goals.

    Customising Your Policy for Comprehensive Coverage

    To tailor your policy effectively:

    • Assess Your Risk: Consider the unique risks associated with your profession and lifestyle.
    • Coverage Level: Determine the optimal level of coverage based on your financial obligations and lifestyle needs.
    • Policy Features: Look for features like indexation, which adjusts your coverage amount in line with inflation, and waiver of premium, which forgives your premiums during periods of claim.

    Next Steps: Preparing for the Future with Confidence

    If you have a personalised income protection plan, it will be possible to focus on creating and improving your business, knowing that you have some financial backup. Remember to update this policy to match your requirements frequently; it will give you comfort and security in the future.

    Through these actions, you can be assured that as you protect the future of your business and the income for yourself and your family, they are based on the educated choices made by an individual.

    FAQ's: Income Protection for Self Employed

    Self-employed individuals have certain protections, including health and safety and discrimination rights. They are responsible for their business’s success or failure.

    Depending on their business, a self-employed person may need various insurances, such as professional liability insurance, employer liability insurance, and buildings and contents insurance.

    Income protection typically pays between 50% and 70% of your pre-tax earnings. The exact percentage depends on the provider and your policy.

    The cost of income protection insurance in the UK varies based on personal and policy factors. It can range from £6 to £75 per month.

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