income-protection-self-employed

Can You Get Income Protection if You’re Self-Employed?


You might be thinking about taking out an income protection insurance policy. These plans can be put in place to provide you with an extra sense of security, just in case illness or injury affects your employment status in the future – after all, life is unpredictable. But what if you’re self-employed, can you still get income protection? 

What is income protection?

I’m sure you’ve heard the term, yet most of us aren’t aware of the details of income protection, or how it might benefit us financially.

Many of us don’t consider what might happen if we’re unable to work for a period of time. It is important to remember that life is unpredictable, and it’s impossible to know when we might, unfortunately, become unwell or injured. For many of us, losing our regular income would be incredibly challenging – after all, we all have bills to pay. So, what’s your plan if something like this were to happen? That’s where income protection insurance comes in. 

Income protection insurance is designed to support you if you’re unable to work due to illness or injury, providing monthly replacement income. Income protection insurance provides you with a tax-free payout that covers up to 70% of your gross monthly pay. This monthly payment will continue until you are ready to return to work; reach state pension age; or if you pass away whilst claiming. In many cases, the monthly benefit will be enough to cover essential household bills, but there are no restrictions for what the money is spent on. The insurance policy can be tailored to suit your needs and you are in control of how long these payments continue. 

It is important that you are honest about any health or pre-existing health conditions when taking out any policy. It can affect your claim, and potentially cause legal problems if you are untruthful in your application to your insurer. 

 I’m self-employed, can I still apply?

Good news! You can still apply for income protection insurance if you’re self-employed. You must be self-employed, either as a Sole Trader, Limited Company director or be in a Partnership in order to apply for self-employed income protection. It works by assessing your work, health, and personal circumstances. A tailored insurance plan will then be created for you by your insurer, and you’ll pay them a monthly premium. 

If you fall ill or are injured and need to claim, your insurer will assess your circumstances then begin your monthly income protection payments. This could be from 50-70% of your average monthly self-employed income. 

When applying for self-employed income protection insurance, you should consider:

  • Policy cease age: This is likely to be the age when you plan to retire, or whenever you wish to cancel the policy. There are options for shorter policies.
  • Deferral period: This is the time between the first day you’re unable to work, and when you receive insurance payments. You may want to start receiving funds immediately, or utilise some of your existing funds for a period of time before you claim. 
  • Payout length: Income protection will usually cover you until you retire or can return to work. However, some people choose shorter payout lengths for a lower premium.
  • Sum assured: If your average monthly income is high, your monthly premium will be higher to assure it. This is because the insurer will need to pay more money to you than people of lower incomes if you wish to claim.
  • Current age: The older you are, the higher your income insurance premium will be.
  • Medical history: Your medical history may affect your monthly premium.

Why is it important when you are self-employed? 

Self-employed income protection insurance means that you will continue to receive regular monthly income due to illness – giving you one less thing to worry about if you become unable to work. This is especially important for self-employed people as they don’t receive sick pay. 

Without income protection insurance, you could receive less than you need if you become unable to work due to illness or injury. You would only be able to apply for Employment Support Allowance (ESA), which starts at £58.90 per week for people under 25 or £74.35 for older people. If you have rent, mortgage payments or a family, ESA alone is unlikely to cover your monthly financial commitments. 

Income protection allows you to receive monthly payments of up to 70% of your monthly self-employed income in the unfortunate event that you become unable to work. This is a worthwhile investment to provide you with peace of mind for yourself and your business. 

The insurer will pay out to cover:

  • Rent
  • Bills
  • Mortgage payments
  • Living costs
  • Outstanding debts

You cannot use this monthly payment to cover: 

  • Business cost
  • Your full salary
  • Large debts

How can I buy income protection insurance? 

At Marchington White Financial Planning Ltd, we can support you to work out your income protection needs, in line with your budget to find the best policy for you. We are regulated by the financial conduct authority. 

Call 07740875159 or get in touch to speak to one of our insurance specialists, who can guide you through the process and support you in choosing the best cover for you and your family.

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