Insurance Guides and Resources

I’m Considering Going Self-employed; Will I Qualify for Income Protection Insurance if I Do?

There’s absolutely no reason to think that you can’t protect your assets/livelihood just because you choose to become self-employed; a decision which increasing numbers of workers here in the UK are arriving at year-on-year.

It’s not altogether surprising, as most of us have – at one time or another – have dreamt of not being answerable to a boss, and instead set your own agenda in your working life/environment. Of course, for all the pros regarding working for yourself (daily commute, gaining autonomy in your role, answering to only yourself and your clients, freedom/flexibility to discover a work/life balance), unfortunately you would be wrong if you believed for one minute that there weren’t any cons (long hours, lack of job security, feeling of isolation, the buck stopping with you). Thankfully foregoing Income Protection insurance isn’t one of the trade-offs you’ll be making should you opt to fly solo any time in the future.

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What is Self-Employed Income Protection and what’s it used for?

Contractors Income Protection is a financial safety net of sorts, if and when the policyholder suffers an unexpected injury or is diagnosed with a serious medical condition/illness during the term of their policy.

Essentially it is designed to replace a percentage of the insured party’s income if they suddenly become out of action, through a monthly sum being paid-out if a claim is successful.

These funds can be used to cover such things as mortgage repayments, personal loans, credit cards and household bills.

Self-Employed Income Protection packages tend to be arranged for either short or long term periods, with premiums paid to the policy provider on a monthly basis.

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Is Income Protection Something that a Contractor or Freelancer Would still be Entitled to Take Out?

There are a number of dedicated Self-employed Income Protection insurance plans available on the current market for self-employed people.

It is important  to note, that in order to be eligible to take out an Income Protection policy the majority of insurers will stipulate that evidence of their income levels will need to be provided either before or after a claim, due in the main to the fact that the maximum cover entitlements are calculated on your existing/projected income stream.

Typical levels of cover range between the 50% - 70% mark (this is based on your current declared income), while it’s worth noting that the higher the amount covered will mean more substantial premiums being quoted/paid by the self-employed individual seeking protection.

Another, perhaps more searching question you have to ask yourself is this. Should I be looking to purchase an Income Protection policy as a self-employed person; which can only be really answered if you take a few pressing elements/criteria into mind before making a decision.

‘Can I afford the monthly premiums?’ (premiums for self-employed people could be higher compared to employed people, to ensure that you do the necessary maths before furthering your interest and determine whether your budget can stretch to this).

Pre-existing policies you may have older policies previously taken out or you may already have some Income insurance coverage in a different form.

Savings or other income And don’t forget to consider whether or not you could survive a lay-off period, by using any savings you may have (or failing that any other monies you may have coming to you and/or a high-earning partner who could absorb the shortfall for a while at least). With direct reference to the latter, maybe you could think about an Income Protection Policy which is geared up to kick in after a longer deferment period.

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What is a ‘Deferred Period’

The term ‘deferred period’ in Income Protection insurance parlance refers to the time which elapses between the juncture at which the policyholder can no longer perform their job and the time at which the policy will start to pay-out monthly benefits to the insured party.

This option represents one of the two main choices offered to someone seeking an Income Protection insurance plan from day one. Continuing the deferred line, and effectively this describes the period someone will have to be off work before the policy starts to make payments, the deferred period can extend from as little as 7 days after to a potential 12 months, post-injury/illness layoff. That said, for those self-employed, this deferred period is usually a shorter for self-employed people.

The other factor which needs consideration is that of the ‘period of pay-out’. By this we mean the length of time the benefit payments paid to the benefactor, this is pre-determined at the start of the policy aimed at a self-employed individual.

Short-term duration policies will typically cover payments for a maximum of 24 months or 2 years; whilst longer-term plans have a habit of continual pay-outs until such time as either the policy reaches its end date or the policyholder makes a return to health; and therein, their work.

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What companies provide self-employed income protection insurance? 

Please feel free to give us a call here at Quick Quote Life, where our established team of insurance experts are available to offer you a range of advice on all insurance matters, products and policy entitlements; be it about coverage in general or a more dedicated/tailored plan based on Income Protection for the self-employed population.

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