Can I get income protection if I’m self-employed?

Yes, you can get income protection insurance if you’re self-employed.

In fact, income protection can be particularly beneficial for those who are self-employed who don’t receive traditional sick pay benefits from an employer.

During periods of ill health or injury, many self-employed workers could miss out on vital income, need to rely on government benefits to get by financially or face going back to work before a full recovery has been made.

If you were unable to work for an extended period, could you afford to keep up with your bills and living expenses?

Why not protect your self-employed earnings with income protection?

Reassured can help you find the right policy to meet your needs at the best available price.

Their FCA-regulated service can provide you with free income protection quotes from the whole of the market.

Simply get in touch to compare quotes from all the UK’s best providers.

This helpful self-employed income protection guide will be covering:

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What is income protection insurance for self-employed?

Income protection is a policy which can protect your income, regardless of whether you’re self-employed or in employment.

An income protection policy can pay out a percentage of your income if you’re unable to work due to illness or injury.

You’ll be provided with a monthly, tax-free, income until you’re able to return to work (or potentially until you retire).

This can help you to cover:

  • Mortgage/rent payments
  • Household bills
  • Living costs
  • Debt or loan payments
  • Leisure costs
  • Transportation expenses

How much income protection do self-employed workers need?

Work out how much income protection insurance you may need based on your current financial commitments. Simply fill in the fields which apply to you for an instant calculation.

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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.

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Do I need income protection if I’m self-employed?

Whether you need income protection as a self-employed worker will ultimately depend on your needs and personal circumstances.

Research from leading provider LV= shows that only 6% of self-employed workers have an income protection product in place, compared to 16% of those in employment[1].

This is despite those in employment already receiving sick pay benefits from an employer or statutory sick pay (SSP) to provide them with an income while they’re unable to work.

Without the right protection in place, those who are self-employed may need to rely on government benefits such as employment and support allowance (ESA) which could pay up to £77.00 per week (or £117.60 if your incapacity means you may struggle to return to work in the future)[2].

Would this be enough to pay your bills, mortgage/rent and essential living costs?

The research also showed that:

  • 17% of self-employed workers would carry on working despite illness or injury
  • 1 in 5 employed and self-employed workers said they would rely on a partners income or savings if they were unable to work
  • 19% said they would struggle to pay their mortgage or rent if unable to work for 2 months due to illness or injury
  • 56% of UK adults would feel more financially resilient if they had an insurance that paid an income if they were unable to work[1]

This suggests that income protection could be beneficial if you’re worried about what would happen to your earnings, or would struggle to make ends meet, if you were unable to work.

Why not compare income protection quotes for the self-employed through Reassured?

A friendly member of the team can help you to find the best policy for your personal circumstances.

How does income protection work for self-employed?

Income protection for self-employed works just the same as any income protection policy.

Policy Term

You’ll be covered for a specified period of time (the term). You can choose the policy term to best meet your needs but cover must cease by your 70th birthday.
Premium Type

You’ll pay a monthly premium for your cover. Premiums could be guaranteed (remain the same), reviewable (change over time) or age-banded (increase each year as you get older).
Definition of Incapacity

If you’re diagnosed with an illness or sustain an injury, that prevents you from working, you could make a claim on your policy. The injury or illness must be one that matches your policies definition of incapacity. This will either be own occupation, suited tasks or any tasks.
Deferred Period clock

You’ll need to wait for your deferred period to end in order for payments to commence. Common, deferred periods can be from 4 - 52 weeks. You must still be unable to work after this time to receive payments.
Benefit Amount

For successful claims, up to 70% of your annual self-employed income could be paid out in monthly (tax-free) payments.
Payment Period

Depending on which you opt for, you’ll either receive payments on a short-term basis (up to 1, 2 or 5 years) or a long-term basis (you could receive payments until you reach retirement).

A friendly member of the Reassured team will be happy to answer any questions you may have and guide you through the whole application process.

Simply get in touch.

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What is the best income protection for self-employed?

The best income protection insurance policy for self-employed will depend on your individual circumstances and your budget.

When establishing the best policy for you, you may wish to consider:

  • How much cover do you need?
  • Do you have savings or another income which could help to ease financial strain?
  • How long do you need cover for?
  • Do you own your own limited company?

As someone who’s self-employed, there are multiple options for you to cover your income, including:

  1. A personal income protection policy - To cover your own income while you’re unable to work
  2. An executive income protection policy - To protect the income of an employee (including self-employed directors of their own limited company)

Keep reading to find out more about the policy options available to those who are self-employed…

What is personal income protection insurance for self-employed?

Personal income protection for self-employed

Personal income protection key points

  • Up to 70% of your usual income could be paid out
  • Will pay out if you become too ill or injured to work
  • Cover can be taken out on a long-term or short-term basis
  • Can help you keep up to date with essential living costs
  • Payments are tax-free
  • Available through Reassured from just 20p-a-day

A personal income protection policy can be secured by any self-employed individual as a way to protect your own income.

The monthly payments you receive can help you keep up with day-to-day financial commitments until you’re well enough to return to work.

Cover can be taken out on a long-term basis, which could provide you with payments until you reach retirement (if your incapacity means you’re unable to return to work).

Alternatively, for those on a tight budget, a short-term policy can be taken out, which could provide payments for up to 1, 2 or 5 years.

Due to the shorter payment period, it could be possible to make multiple claims throughout the policy lifetime.

Why not compare personal income protection polices from the whole of the market through Reassured?

What is executive income protection for self-employed?

Executive income protection for self-employed

Executive income protection key points

  • Up to 80% of the insured person’s income could be paid out
  • Can cover employer pension contributions, dividends and employer national insurance contributions
  • Payments will be made to the business and then passed onto the insured person using PAYE
  • Payments can be tax deductible for the business
  • Available through Reassured

Executive income protection can be taken out by small - medium sized businesses as a way to protect the income of an employee.

Any employee could benefit from the payments from an executive income protection policy, including self-employed directors.

As an executive income protection policy is set up and paid for by a business, the premiums could be classed as a business expense (making them tax-deductible).

However, as the payments are passed on using PAYE, the person receiving them will be required to pay for national insurance and income tax.

Reassured can help you compare executive income protection quotes from some of the UK’s leading providers.

We have a complete executive income protection guide if you require more information »

How much is income protection for self-employed?

Income protection for self-employed people can be taken out through Reassured from just 20p-a-day.

However, the exact price that you pay will depend on your personal circumstances.

You’ll need to provide the following personal details during the application process:

The following details about your policy will also impact the price that you pay:

  • Cover amount
  • Policy term
  • Payment period
  • Deferred period
  • Definition of incapacity
  • Premium type

Providers will assess your level of risk using the factors listed above and your premium will be calculated accordingly.

The pricing table below shows example quotes for a self-employed worker.

Quotes are based on a non-smoker, in good health, with a low-risk occupation and an annual salary of £40,000. The policy term is until age 65, with a 3 month deferred period and a 1 year payment period:

AgePrice per month
20£6.34
25£6.70
30£7.66
35£9.87
40£12.83
45£16.52
50£19.97


While the quotes above help to give an idea on pricing, the cost of your policy can vary significantly depending on your line of work.

For example, a self-employed construction worker will likely pay more than a self-employed graphic designer due to the greater risk involved in this occupation.

Comparing quotes is essential in securing the most affordable cover for your personal circumstances.

Why not let Reassured save you time and money by helping you do this?

Their whole of market comparison service can provide you with quotes from top UK providers, as well as smaller specialists. Simply get in touch.

What illnesses does income protection for self-employed cover?

Income protection can cover self-employed workers for a wide range of illnesses and injuries.

As there’s no set list of conditions which are covered, as long as you meet your policy’s definition of incapacity, you can claim for anything that leaves you unable to work.

In 2021, leading provider LV= found that the most common reasons for claiming on an income protection policy included:

To fully understand your policy (and what you’ll be covered for) why not contact Reassured?

A friendly member of the team can take you through all the terms and conditions to ensure the policy you choose is right for you.

How much does income protection for self-employed pay out?

Up to 70% of your self-employed income can be paid out in monthly, tax-free, payments.

As someone who is self-employed his percentage will be based off your net profit.

If securing an executive income protection policy, up to 80% of the insured person’s income could be paid out.

When will income protection for self-employed pay out?

Income protection will start to pay out once the deferred period has come to an end.

The deferred period will be established during the application process and is typically 4, 8, 13, 26 or 52 weeks.

After the initial claim has been made, you’ll still need to be unable to work in order for your payments to commence.

For example, if you opt for a 4 week deferred period, you must still be unable to work after 4 weeks for your policy to start paying out.

Some policies will offer a ‘back-to-day-one’ deferred period which could be particularly beneficial for the self-employed.

A back-to-day-one deferred period which can allow you to claim and start receiving payments within just a few days. Not all providers will offer this option.

Compare quotes through Reassured to find the best policy to meet your needs, including providers who offer a back-to-day-one deferred period.

Is income protection insurance tax deductible for self-employed?

If you’re the owner of a limited company and you secure an executive income protection policy, the premiums will be paid for by the business and could be classed as a business expense.

This would make them tax-deductible.

The premiums paid on a personal income protection policy can’t be treated as a business expense as they are paid for out of your own money.

However, the payments you receive from a personal income protection policy are tax-free.

How do I protect myself as a self-employed worker?

Income protection is just one of the ways you can protect yourself as a self-employed worker. You may also wish to consider other forms of financial protection, such as:

  • Life insurance - Provides a lump sum payment to your loved ones if you pass away during the term of your policy. This can help loved ones to pay off the mortgage, cover your funeral costs or it can be left as an inheritance for them to spend as they wish. Why not read our complete life insurance for self-employed guide?
  • Critical illness cover - Provides a tax-free cash lump sum if you’re diagnosed with a serious, but not terminal, illness. This policy covers a wide range of illnesses, including some cancers, heart attack and stroke. It can be added to a life insurance policy for an additional cost or taken out as a standalone policy through some providers
  • Family income benefit - This is a life insurance policy that will pay out to your loved ones in monthly instalments, rather than a lump sum. Upon your passing, your loved ones will receive monthly payments for the remaining policy term. Ideal for protecting long term family budgeting
  • Terminal illness cover - Comes at no extra cost with all term life insurance policies, and selected over 50s policies, through Reassured. It allows you to make an early claim on your policy if you’re diagnosed with a life-threatening illness and predicted to pass away within 12 months - allowing you to pay for end of life care and/or make sure your financial affairs are in order

Reassured can help you compare income protection, life insurance, family income benefit and life insurance with critical illness.

An expert member of the team can provide you with all the information you need to know about each policy, allowing you to secure the right policy (or policies) to meet your needs.

Simply get in touch for your free quotes.

Compare income protection quotes for self-employed

Income protection can be a vital financial support for those who are self-employed who don’t benefit from traditional sick pay benefits.

By securing income protection you can ensure that you keep up to date with all your essential monthly outgoings without having to rely on others, make cutbacks or return to work before you’re ready.

It could also be possible to secure executive income protection, if you’re the owner of a limited company, to provide financial protection to an employee.

Through Reassured it’s possible to compare both personal income protection plans and executive income protection.

All quotes are personalised, fee-free and no-obligation, so get in touch today to explore your options.

Compare Self-Employed Income Protection Quotes »

Sources:

[1] https://www.covermagazine.co.uk/news/4062531/self-employed-purchase-income-protection

[2] https://www.gov.uk/employment-support-allowance/what-youll-get

[3] https://www.lv.com/income-protection/faq/what-are-the-most-common-types-of-claim-you-pay

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