Can contractors get income protection?

Yes, it’s possible for contractors to take out an income protection policy.

As a contractor it’s unlikely that you’ll benefit from having sick pay during periods of ill health or injury.

The thought of not being able to earn an income can be a scary prospect for anyone, but especially those that don’t have access to any sources of financial support.

Although you may be eligible for government disability or sickness benefits, this amount is unlikely to be enough to cover all key expenses.

This is where income protection insurance for contractors can be particularly beneficial, as payments can mimic a monthly income to help you keep up with living costs while you’re unable to work.

Why not compare income protection quotes using the services of Reassured Advice? By using their whole of market comparison you can find the best policy to meet your needs at the most affordable price.

Quotes are fee-free, personalised and without obligation. The best part is quotes through Reassured Advice start from just 20p-a-day

Keep reading this comprehensive contractor income protection guide to find out everything you need to know…

What is contractor income protection?

Contractor income protection is simply an income protection insurance policy taken out by a contractor.

Income protection is designed to pay out a percentage of your income, in monthly payments, while you’re unable to work due to sickness or injury.

There are typically two options available for contractors:

  1. A personal income protection policy - This is a standard income protection policy that will protect up to 70% of your income. This is a policy that is paid for out of your own pocket
  2. An executive income protection policy - This is an income protection policy that can be paid for by your limited company and the premiums paid can be tax deductible. This form of income protection could protect up to 80% of your income (including earnings, dividend drawdown, pension and national insurance contributions). This is an ideal option for those with limited companies as the policy will be set up in the name of the company for the benefit of the director and the company

While executive income protection has the benefit of being tax deductible, if you leave the company or the company goes bust, you’ll no longer benefit from this protection as the premiums are paid for by the company and the policy will be taken out under the company’s name.

With a personal income protection policy, your cover will remain in place until the policy term comes to an end.

Executive income protection isn’t something that’s currently offered by Reassured Advice but a friendly member of the team can help you to compare personal income protection quotes free of charge.

Do I need contractor income protection?

As contractors don’t benefit from the financial safety net of sick pay while they’re unable to work, it can be wise to have other forms of protection in place - such as income protection.

This is because income protection can pay out a replacement income to help you cover key financial commitments, such as:

  • Mortgage or rent payments
  • Household bills
  • Weekly food shop
  • Childcare expenses
  • Transportation costs
  • Loan/debt payments
  • Leisure costs

Talking to an expert can help you to establish whether income protection is right to meet your needs.

Why not speak to Reassured Advice? A friendly member of the team can provide you with all the information you need and help you to compare quotes to find the best available deal.

How much income protection insurance do you need?

Enter your monthly financial commitments to understand the level of contractors income protection cover you require.

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£723 a month is the average monthly mortgage payment in the UK, with the average monthly rental price coming in at £700.

The majority of our monthly income will go towards rental or mortgage payments.

For this reason, it’s essential to have precautions in place to ensure you could keep up to date with your payments if you weren’t receiving your usual income.

Monthly income protection payments can help to cover this large expense and ensure you can stay in your home.

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According to the Money Advice Service, the average household spends £340 a month on household bills.

This includes electricity, gas, TV and broadband.

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Childcare costs are on the rise with it now costing £137.69 per week for part-time nursery for a child under the age of two.

That’s over £550 per month - is this an amount you’d be able to keep up with if you were unable to work?

Becoming ill could also result in the need for additional childcare while you attend doctors’ appointments or medical treatment.

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The average household in the UK spends around £97 a week on their food shop, totaling £388 a month.

While this may seem like a small amount in comparison to some of the other expenses mentioned, the food shop is often where we try to scrimp and save when we fall on hard times.

Income protection can take care of the cost of your weekly food shop, as well as many other essential costs.

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At the beginning of 2020, credit card debt in the UK was at £2.1 billion, with almost 27 million UK residents in some kind of debt.

Becoming unable to work could make it hard to keep up with credit card or loan payments (including car finance or other financed goods).

Failure to keep up with payments could result in additional interest being incurred or late fees issues - resulting in a higher total needing to be paid.

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The average spent on public transport each month comes to an average of £94.

This includes the cost of public transport, as well as petrol and diesel vehicles.

While this amount may reduce while you’re unable to work as you won’t need to commute there may be additional spending on public transportation if your illness or injury leaves you unable to drive.

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Your total cover estimate

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Let us find your best quotes.

Income protection for self-employed contractors

The vast majority of contractors are self-employed, meaning it’s particularly important to have financial protection in place to protect your self-employed income.

Despite this, research from top UK insurer The Exeter shows that less than 1 in 10 self-employed workers protect their income with insurance.

With 31% of self-employed workers having less than £2,000 in savings to fall back on[1].

For a self-employed worker, being unable to work due to illness or injury could result in a devastating loss of money.

Income protection can be a huge benefit to self-employed contractors as monthly payments can help to keep you afloat financially until you’re able to return to work.

If taking out a long-term income protection policy, you could even receive payments until you reach retirement (if you’re unable to work again), meaning you’re covered for your whole working life.

Why not compare quotes for self-employed income protection using the services of Reassured Advice?

We have a full income protection for self-employed guide which you may find useful »

Best income protection for contractors

The best income protection to meet the needs of contractors will depend on a variety of factors.

One of the main factors will be your employment status, as this will dictate what options are available to you.

A personal income protection policy will be available to all contractors, whether you own a limited company, are a sole trader, work for an umbrella company or for an agency.

However, if you're the owner of a limited company, you will also have the option of an executive income protection policy.

Keep reading as we explore these policies in more detail…

Contractor income protection policy

There are two policy options available to contractors who are taking out an income protection policy.

Which is best for you will depend on your personal circumstances.

Contractor income protection policies include:

Income protection for contractors personal income protection

A personal income protection plan:

  • Can protect up to 70% of your usual income
  • Will need to be paid for using your own money and can’t be claimed as a business expense
  • Well suited to contractors who are a sole trader, work for an umbrella company or for an agency
  • Can help you to cover key financial expenses while you’re unable to work
  • Cover can remain in place even if you change careers
  • Can be taken out from 20p-a-day through Reassured Advice
Income protection for contractors executive income protection

An executive income protection plan:

  • Can protect up to 80% of your usual income (this includes your earnings, dividends, dividends paid to a spouse, pension and national insurance)
  • Premiums will be paid by your limited company and therefore can be claimed as a business expense (making them tax deductible)
  • Most suitable for contractors who own a limited company
  • If you move on from the company or the company closes down, you likely won’t benefit from the cover any more as the policy will be in the name of the company
  • Can’t be arranged through Reassured Advice

When setting up an income protection policy, there are a few policy terms and conditions that you should be aware of. It’s important to choose wisely to ensure your policy meets your needs.

Insurance TermDescription
Policy termThe policy term refers to how long you’ll be covered for. How long your policy should be will depend on your personal needs and circumstances. As a contractor you may wish to choose the maximum term length possible to ensure you’re the most comprehensively covered. There is usually an upper age limit by which your policy must end by (this can vary between providers).
Benefit amountIn terms of income protection, a ‘benefit amount’ refers to how much will be paid out to you. Typically, a standard income protection policy will pay out between 50% and 70% of your usual income in monthly payments. So the exact amount paid out to you will depend on your income.
Payment periodThis refers to how long you’ll receive income protection payments for. You can choose between short term (which will pay out to you for a maximum of 1 - 2 years) or long term (which can pay out to you until you reach retirement).
Deferred periodThe deferred period is the length of time you must be unable to work in order for your payments to commence. Commonly deferred periods can be as short as 4 weeks and as long as 52 weeks. Some providers will offer a ‘day 1’ deferred period which means you’ll be able to receive payments after just a few days of being unable to work. Your payments will only commence if you’re still unable to work after your deferred period has ended.
Definition of incapacityThis refers to what qualifies you to start claiming your income protection payments. Common definitions include:
  • Own occupation - This will allow you to claim if you can’t carry out your specific job
  • Suited tasks/suited occupation - If you’re unable to carry out your own job, you may be asked to do a different job which is suited to your skills and knowledge. You can make a claim if you’re unable to do either
  • Any occupation - You must be unable to work in any job or carry out basic daily tasks in order to make a claim
Premium typeThis refers to how you’ll pay for your cover. common premium types include:
  • Guaranteed - The amount you pay remains the same throughout the lifetime of your policy
  • Reviewable - The amount you pay is subject to change due to different factors decided by your provider
  • Age-banded - The amount you pay will increase each year as you get older


Reassured Advice can help you to compare personal income protection quotes from the whole of the market, allowing you to find the right policy at the best price. Simply get in touch.

How much does contractor income protection cost?

The exact price you’ll pay for income protection will depend on a variety of factors. This includes both information about you and your chosen policy.

Key information required to calculate your premium includes:

  • Age
  • General health and wellbeing
  • Occupation
  • Smoking status
  • Lifestyle


Policy details which influence the price you pay:

  • Policy type
  • Length of payment period
  • Length of deferred period
  • Definition of incapacity
  • Premium type

It’s essential to compare quotes to make sure you’re taking out a policy that meets your needs at the most affordable price.

The table below shows pricing examples for a personal life insurance plan for a contractor.

The quotes are based on a non-smoker who is in good health, with an annual income of £40,000. Cover is up to age 65 with a 3 month deferred period and with a maximum benefit amount (£2,000 per month):

AgePrice per month
25£6.72
30£7.66
35£8.89
40£12.90
45£16.85
50£22.40


Contact Reassured Advice for your personalised, fee-free and no-obligation quotes.

Is income protection an allowable business expense?

Taking out a personal income protection policy won’t be classed a business expense.

However, if you're the owner of a limited company you have the option of taking out an executive income protection policy.

This is an income protection policy that will be taken out under your company’s name and the premiums will be paid for by the company, meaning they can be classed as a business expense (making them tax deductible).

Executive income protection isn’t something that is currently offered by Reassured Advice.

Other policies for contractors:

There are some other policy types that contractors may want to consider:

  • Life insurance - While income protection can help to provide you with cover during your working life, life insurance can provide essential financial support to your loved ones after your passing. A life insurance policy will pay out a lump sum to you loved ones if you pass away while your policy is active. There are a range of life insurance options available to contractors, why not read our complete contractor life insurance page to find out more?
  • Critical illness cover - Critical illness cover will pay out a lump sum to you if you’re diagnosed with a serious illness. The funds from the pay out can be used to help replace lost income while you’re unable to work, however, you will need to make sure you budget the money wisely as you will receive one lump sum - not regular, monthly payments. Critical illness cover can be taken out a standalone policy through some providers or it can be added to a life insurance policy for an additional fee.

Reassured can help you to compare life insurance with critical illness cover from some of the UK’s leading providers.

Life insurance with critical illness cover starts from just £10 a month through Reassured º

Compare contractor income protection quotes

While Reassured Advice can’t currently help you to compare executive life insurance policies (for those with limited companies), a friendly member of the team can help you to compare personal plans.

Reassured Advice can help you to compare quotes from the whole of the market (from top UK providers to smaller specialists) and provide you with the best policy options for contractors.

This way you can secure a policy that meets all of your needs, at the most affordable price.

Protect your income from just 20p-a-day through Reassured Advice and have peace of mind that you’ll have financial support while you’re unable to work due to sickness and injury.

Quotes through Reassured Advice are fee free and completely without obligation, so why not get your journey started today?

Sources:

[1] https://www.the-exeter.com/news/nearly-a-fifth-of-self-employed-workers-have-no-savings-at-all-but-less-than-one-in-ten-protect-their-income-research-from-the-exeter-shows/

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