Self-employment comes with many benefits, but you don’t get the financial security of employee benefits such as sick pay.
That is why income protection can be vital to the self-employed, giving people the peace of mind that if they become ill or are injured, they will still have an income to pay the bills and mortgage payments.
An income protection policy will pay out if you are unable to work due to having an illness or have suffered an injury.
This will ensure that financial commitments are covered, with tax-free monthly income continuing until retirement or until the individual is well enough to commence work again.
Similar to most insurance policies the cost depends on individual circumstances and what type of policy.
The short-term policies that only pay up to 1 or 2 years are often cheaper than the longer-term policies but can have a longer waiting time once a claim has been made.
Other factors that insurers use to assess the level of risk are age, occupation, health, lifestyle, and smoking status.
The older you are the higher the policy will be due to an injury or becoming ill being more likely. Insurers also look at your occupation with some jobs being riskier and with the greater chance of injury such as working on a construction site.
Pre-existing health conditions can cause the premium to be higher and the same can be said for those that smoke regularly.
Income protection is important to ensure financial safety if unable to work, while life insurance for self-employed can provide a cash pay-out for your loved ones if you are no longer around. Helping with the cost of the mortgage, funeral, and other outstanding costs.
Insurers would recommend having multiple policies when self-employed to give you the peace of mind everything is covered.
Without having life insurance covered when working for yourself, it can leave your loved ones to cope with the various costs. What your loved ones have to do if you don’t have life insurance:
∙ Replace a lost income
∙ Meet mortgage repayments
∙ Pay for additional childcare
∙ Cover funeral costs
The above costs can become a great challenge for loved ones without financial support. The average UK mortgage debt is over £130,000, while the average cost of raising a child until they are 18 is £152,000.
When self-employed it is important to look into all the protection you need to ensure your income is protected but also your loved ones.