According to figures released by the office for National Statistics (ONS) over four million people are in self-employment *.
The freedom of being your own boss is one of the many appeals of being self-employed. The choice of being able to work from where you want, pick your own hours and who you work with are also desirable, but self-employment can come with a lack of financial security. Not everyone has the luxury of having a large amount of savings, and for some people, not being able to work could have disastrous consequences.
Self-employed people may have multiple ways of paying themselves, and may have multiple self-employed statuses. For example, someone who works as an independent builder on one-off building contracts may also have rolling contracts to maintain company buildings, or do other freelance paid jobs in their local community.
But without the financial security of having a contracted job and an employer with a regular income, and the added legal protection of notice periods and sick pay, it is important to build in this protection yourself.
Income protection for the self-employed
Income protection is one of the most common policies that is taken out by those who are self-employed as it can ensure the basic costs of living are covered in the event of sickness or an accident.
Income protection tends to pay out between 50% and 70% of your regular income if you cannot work, either for a set period or until you reach retirement age.
One of the challenges for those who are self-employed is proving an accurate assessment of income to an insurer when it can be variable each month or year. However, many leading named insurers have addressed this issue, and a number of policies are designed specifically with fluctuating incomes in mind.
There are now a range of mortgage and rent cover policies for flexible workers which can provide cover for up to two years. Some don’t require you to have to work a certain number of hours or show proof of income to be eligible, but typically the benefit must be no higher than your housing costs. Other policies do require a proof of income but offer capped benefits, for example up to £250 a week.
The cost of protection
The price of income protection is based on factors including your age, profession, lifestyle and health and premiums can vary widely. An adviser can provide you with a no obligation quote based on your personal circumstances.
There are ways you can reduce the cost of your income protection cover. You can often lower monthly premiums by delaying when the policy starts to pay out. This may be a good option if you know you could cover your expenses out of your savings for a few weeks or months.
The cost of protection
Each insurance company varies in the type of insurance cover they provide, the cost of cover and the eligibility rules surrounding the application.
This is where your adviser can really help. They are able to review your circumstances, know which insurance company will be able to offer you income protection and secure quotes to be able to find you the best cover. They are also experienced at working with the insurance company underwriters and will be able to prepare your application with all the information needed for it to be accepted as well as handling queries if they arise.
If you would like a no obligation conversation with one of our independent advisers, you can get in touch on 0116 269 6311 or by emailing info@furnleyhouse.co.uk. Alternatively, you can request a callback here.
* https://www.statista.com/statistics/318234/united-kingdom-self-employed/
Please note: If premium payments are not maintained, the benefits of the plan will be put at risk. If premium payments cease altogether, the benefits of the plan will cease. The cover may be less than you need if you do not review it regularly.
