Income protection for the self-employed
Do self-employed people need income protection?
Often more than employees do. If you are self-employed, there is no employer sick leave or salary to fall back on, so if illness or injury stops you working, your income can stop immediately. Income protection replaces a portion of your earnings after a waiting period, which is why it is especially important for freelancers, contractors and business owners.
Key takeaways
- The self-employed have no employer sick pay to fall back on.
- If you cannot work, your income can stop straight away.
- Income protection replaces a portion of your earnings after a waiting period.
- Proof of income matters more when you are self-employed.
- It is often more important for the self-employed than for employees.
Why the self-employed are more exposed
Employees often have sick leave and sometimes employer benefits to cushion a period of illness. The self-employed usually have neither. If a freelancer, contractor or business owner cannot work, the income can stop the same day, while costs carry on. That gap is exactly what income protection fills, which is why it is often more important for the self-employed than for salaried workers.
How the cover works for you
Income protection works the same way whether you are employed or not: after a waiting period, it pays a monthly benefit, a portion of your earnings, while you cannot work. As someone self-employed, you should think carefully about the waiting period, since you may not have sick leave to bridge it, and about how your income is measured for the benefit.
Proving your income
Because your earnings may vary, insurers usually assess self-employed income from financial records such as tax returns or management accounts. Keeping clean, up-to-date records makes it easier to set the right cover amount and to claim smoothly. Insure a realistic figure based on your actual earnings, since over-insuring will not pay out more than the policy's income rules allow.
Getting cover in place
Match the benefit to what your household needs, choose a waiting period you could realistically bridge, and check how the policy defines inability to work for your occupation. Consider pairing it with disability cover and dread disease cover for broader protection. Compare quotes. This is general information, not financial advice.