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The thought of not being able to work due to long term sickness is a scary prospect for anyone, but especially those who don’t receive sick pay.
As a contractor, it’s unlikely that you’ll benefit from sick pay during periods of ill health, meaning you’ll need to rely on your own savings or government support like ESA (Employment and Support Allowance) to get by.
Securing an income protection policy can allow you to protect a percentage of your earnings to help you keep up with daily living costs and financial commitments.
Up to 70% of your income could be paid out in monthly, tax-free, payments while you’re unable to work due to illness or injury.
Why not compare income protection quotes through Reassured Advice?
Using their whole of market comparison service you can find the best policy to meet your needs at the right price for your budget.
Quotes are fee-free, personalised and without obligation. But the best part is that quotes start from just 20p-a-day ‡ . Simply get in touch today.
Keep reading this in-depth income protection for contractors guide as we cover:
Yes, contractors are able to secure income protection to protect their earnings against sickness and injury.
As contracting can cover a wide range of industries (IT, engineering, project management, design, construction etc), you’ll be asked questions about your occupation during the application process so insurers can find out more about your line of work.
While being a contractor won’t affect your ability to secure cover, it could affect the price you pay depending on what industry you work in.
For example, an IT contractor is likely to pay less than a contractor who works in construction. A construction worker could be seen as a greater risk due to the hazards of being on site.
It’s still possible to secure affordable cover whatever your line of work.
Reassured Advice can find you the best quotes for contractors from leading UK insurers and smaller specialists.
Income protection for contractors is simply an income protection policy taken out by a contractor to protect their earnings.
There’s no specific income protection policy for contractors.
How does income protection work for contractors?
Income protection for contractors will work no differently to a standard income protection policy.
Income protection can be beneficial for anyone with financial commitments, but particularly those who don’t benefit from employer sick pay.
While the government offers ESA, how much you’re eligible for is affected by factors such as what stage your assessment is at, your age and whether you’ll be able to go back to work.
The standard ‘assessment rate’ (paid for 13 weeks) is up to £67.20 per week if you’re under 25 or up to £84.80 per week if you’re aged 25 or over.
You’ll be then placed into either the work-related activity group (if you’re able to get back into work) which could pay out up to £84.80 per week, or the support group (if you’re unable to return to work) which could pay out up to £129.50 per week.
Would this be enough to help you cover your living costs?
While personal savings could help to keep you afloat it would be a shame to dip into these funds if you had intended them for something else.
The experts at Reassured Advice can provide you with all the information you need and give recommendations on what’s right for you.
Why not use our handy income protection insurance calculator below to work out how much cover you may need to help protect your essential costs?
The best income protection insurance for contractors will depend on your personal circumstances and available budget.
Income protection comes with flexible terms and conditions which can be chosen to best meet your needs.
When securing cover, it’s important to be aware of these key policy features:
|The amount that will be paid out to you on a monthly basis. Typically this is up to 70% of your usual earnings before tax. It can also be referred to as your ‘monthly benefit’ or ‘cover amount’.
|Definition of incapacity
|When you’ll be able to make a claim. Most policies come with an ‘own occupation’ definition, which allows you to claim if you’re unable to do your own job. But, it’s also possible to secure ‘suited occupation’ and ‘any occupation’ definitions.
|How long your cover will last for. The policy term is a set period decided upon during the application. You have the freedom to choose a term which meets your needs but, often it must end by your 70th birthday.
|A set period that must pass before your payments will commence. You’ll decide on a deferred period during the application process. Typical options include 4, 8, 16, 26 and 52 weeks.
|How long you’ll receive payments for. This could be on a short term basis up to a maximum of 1, 2 or 5 years or a long term basis until the policy comes to an end (full-term).
|How you’ll pay for your cover. Most premiums are guaranteed, meaning they won’t change over time. However, it’s also possible to secure cover with reviewable (change over time due to certain criteria) or age-based (change each year with age) premiums.
Talking your options through with an expert can help you find the best policy to meet your needs for the most affordable price.
For example, if you’re self-employed, opting for a shorter deferred period could allow you to start receiving payments quickly - reducing the amount of time you would need to rely on your own funds.
You could also opt for a long-term payment period to ensure you’re covered for the rest of your working life. If your incapacity meant you were unable to return to work, you could receive payments up until retirement age.
Not only can the team at Reassured Advice compare quotes from the whole of the market, but they can also recommend what’s best for you based on your personal circumstances.
Get in touch for your free quotes today.
The price you pay for income protection as a contractor will depend on a variety of factors.
Key information required to calculate your premium includes:
Information about your policy will also impact the price you pay, including:
Your field of work could impact the price you pay depending on the level of risk involved in your job.
You’ll be asked questions about your job so insurers can understand the level of risk. For example, a contractor working in construction could pay more due to working at height or around dangerous machinery.
Comparing quotes is essential in finding the most affordable price for your personal circumstances.
The table below shows example quotes for a self-employed electrical contractor, who is a non-smoker in good health, with an annual income of £40,000. Cover is until age 65 with a 3 month deferred period and a 12 month payment period:
|Price per month
Contact Reassured Advice to compare income protection quotes from the whole of the market.
Find your best quotes and receive personalised recommendations on what’s right for your needs.
The vast majority of contractors are self-employed, meaning it’s particularly important to have the right cover in place to protect your self-employed earnings.
For self-employed contractors, having to take time off due to illness or injury could result in a devastating loss of income - particularly if your incapacity meant you were unable to work for a prolonged period.
Many may even consider returning to work before a full recovery has been made to avoid the loss of any more earnings.
Recent research from Scottish Widows shows that 24% of self-employed workers only have enough money to cover costs for three months if they were unable to work.
Income protection can be a huge benefit to self-employed contractors as the monthly payments can help you to keep up with essential financial commitments - allowing you to take the time off that you need.
If you’re self-employed and have your business set up as a limited company, you also have the option of an executive income protection policy.
This is a policy that will be set up and paid for by your business, allowing you to cover the income of an employee (this could be any employee, including yourself).
Why not read our complete executive income protection guide for more information? »
Typically, no. If you take out a personal income protection policy, this can’t be classed as a business expense.
This is because the policy is taken out in your name and the premiums are paid for out of your own pocket.
However, if you have a limited company and take out an executive income protection policy, this could be classed as a business expense.
An executive income protection policy is set up and paid for on behalf of your business - therefore the premiums could be considered a business expense (therefore making them tax deductible).
Yes, once cover is in place, your occupation won’t impact whether your policy will pay out to you.
Your illness/injury simply must meet the definition of incapacity listed within your policy and you must be incapacitated for longer than your deferred period for your policy to pay out.
The only time an income protection policy won’t pay out is if:
To understand what income protection covers it’s always important to read your policy terms and conditions »
Comparing quotes is the best way to find the right policy to meet your needs.
Reassured Advice can help you compare both personal income protection plans and executive income protection (for those with limited companies).
Simply get in touch to be provided with multiple quotes from leading UK insurers, as well as personalised recommendations on what’s best for you.
A friendly member of the team will also be on hand to guide you through the application, answer any questions you may have and decode any industry jargon.
Quotes through Reassured Advice are fee-free and completely without obligation, so why not start your journey today?
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