Written by: Danny Belton - Head of Lending
In the ever-evolving landscape of the modern workforce, self-employment has become an increasingly popular choice for many in the UK. Whether you’re a freelance designer, a small business owner, or a gig economy worker, being your own boss offers a sense of freedom and flexibility that traditional employment often can’t match.
However, with this autonomy comes the responsibility to manage your own financial security. While there are restrictions in place in standard employment, you’re entitled to sick leave from your company if you become ill. If you become ill while you’re self-employed, you’re solely responsible for handling the sudden lack of income.
Let’s explore how you can safeguard yourself against this possibility.
The role of income protection in self-employment
One of the most significant challenges self-employed people face is income instability. Unlike employed workers, who receive a regular paycheck, self-employment can mean fluctuations in your earnings. Business income can vary month to month, even year to year, making it challenging to predict and plan for financial stability.
While self-employment can mean the potential for higher income (plus flexible working hours), it also entails certain risks and uncertainties that employees in traditional roles may not face.
Income protection is a financial safety net, designed to support those who are unable to work due to illness, injury, or disability. While it’s not mandatory for self-employed individuals, it can be a crucial tool in your financial wellbeing toolkit.
Here are a few reasons why you should consider income protection if you’re self-employed:
Financial security in uncertain times
Life is unpredictable, and accidents or health issues can strike anyone at any time. Without income protection, self-employed individuals risk losing their primary source of income when they can’t work due to unforeseen circumstances. Income protection provides a steady stream of income during these challenging periods, helping to maintain your financial stability.
Peace of mind
Knowing that you have a safety net in place can significantly reduce stress and anxiety. Self-employed individuals often worry about the impact of a sudden illness or injury on their livelihoods. Income protection offers peace of mind, allowing you to focus on your recovery without the added stress of financial concerns.
Protection for your business
Many self-employed individuals have invested significant time and resources into building their businesses. Depending on your business structure, income protection ensures that your business can continue to operate, even when you can't actively participate. This can help safeguard your business's reputation and client relationships.
Customised coverage
Income protection policies can be tailored to your specific needs and circumstances. You can choose the waiting period before benefits kick in, the duration of coverage, and the monthly benefit amount. This flexibility allows you to create a policy that aligns with your financial goals and obligations.
Secure your financial future with income protection
While being self-employed can be rewarding, and offers several advantages, it also comes with a unique set of challenges. In the financial realm, this is the inherent uncertainty you may face when considering what would happen if you got sick and couldn’t work.
Income protection insurance is designed to provide a regular income if you are unable to work due to illness or injury. This can help cover your living expenses and bills while you focus on recovering. As a self-employed individual, having this safety net in place can give you peace of mind knowing that you won't have to worry about how you will make ends meet if you are unable to work.
In addition to providing financial security, income protection insurance can also help with business continuity. If you are the sole proprietor of your business, being unable to work could have a significant impact on your operations. With income protection in place, you can rest assured that your business can continue to operate even if you are unable to work.
Don't wait until it's too late to protect your financial future. Contact us today to learn more about income protection insurance and how it can benefit you as a self-employed individual. Let us help you navigate the uncertainties of being your own boss and ensure that you have the support you need in times of need.
Frequently asked questions
Income protection insurance is a type of policy that provides you with a regular income if you’re unable to work due to illness, injury, or disability. It helps maintain your financial stability during periods when you cannot earn money through your self-employment.
Self-employed individuals should consider income protection because they don’t have access to benefits like sick leave or employer-provided health insurance. Income protection can help cover living expenses and maintain financial stability when you can’t work due to health issues.
When you take out an income protection policy, you pay regular premiums. If you become unable to work due to illness or injury, the policy will pay out a portion of your income, usually a percentage of your regular earnings, after a pre-agreed waiting period.
Yes, income protection policies can be customized to fit your needs. You can choose the waiting period before the payments begin, the duration of the coverage, and the monthly benefit amount. This flexibility allows you to tailor the policy to match your financial situation and goals.
When choosing an income protection policy, consider the level of coverage you need, the waiting period before benefits begin, the duration of the payout period, the cost of premiums, and any exclusions or limitations in the policy. It's important to select a policy that aligns with your financial needs and circumstances.
In the UK, the premiums you pay for income protection insurance are not typically tax-deductible for self-employed individuals. However, the benefits you receive from an income protection policy are usually tax-free. Always consult with a financial advisor for the most current tax advice.
Important information
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