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

What is income protection?

Income protection is a type of insurance. It pays you a set monthly amount if you can't work because of illness or injury. The money is usually tax-free, and you can spend it on anything: your mortgage, rent, bills or food.

You’ll be asked to choose three main things when you set it up:

• How much cover you want, up to a limit set by the insurer
• How long to wait before payments start, this is known as the deferred period
• How long payments last, either for a set period of time or right up to retirement

Payments carry on until you can work again, your policy ends, or you retire, whichever comes first. You can usually claim more than once while the policy runs.

Why it matters more when you're self-employed

When an employee is off sick, they often get help. Many employers pay their own sick pay. After that, Statutory Sick Pay (SSP) can kick in.

From April 2026, SSP starts on the first day of sickness. It's worth £123.25 a week, or 80% of earnings if that's lower. But there's a catch for you. SSP is only for employees. If you're a sole trader or in a partnership, you can't claim it.

So what can you fall back on? Not much.

If you're a sole trader or in a partnership, you can't claim SSP at all. Your main option is a state benefit called New Style Employment and Support Allowance (ESA). It depends on your National Insurance record, and it pays only a modest weekly amount, well below most people's earnings.

Here's how the safety net compares:

That gap is why income protection matters more for you. Your income relies on you turning up. If you can't, it stops.

The types of income protection

There are two main types. Finding the right one for you depends on how long you'd need the payments to continue for.

Short-term cover

Short-term income protection pays out for a set period, usually up to one or two years per claim. Then the payments stop. It costs less and can be enough if you have savings or a partner's income to lean on later.

Long-term cover

Long-term income protection, sometimes called full-term cover, pays until you can work again, your policy ends, or you retire. It costs more, but it protects you against a long illness. For many self-employed people with no other safety net, this is the safer choice.

Your deferred period

The deferred period is the wait between stopping work and your first payment. Common choices are 4, 13, 26 or 52 weeks. The longer you wait, the cheaper the cover. If you have savings to live on for a while, a longer wait can cut your premiums. If you don’t have much saved to fall back on, a shorter wait costs more but pays sooner.

How much can you cover?

You can't insure all of your income. Most insurers cover between half and two-thirds of your earnings, and some go up to 70%. Because you're self-employed, cover is usually based on your gross profit, which is your income after business costs. That's the figure you pay tax on. Some insurers average it over one year, others over three, so check how yours works.

How to choose the right income protection policy for you

There's no single best income protection policy. Two policies can look alike but then behave very differently. When you compare, look past the monthly price and make sure you check these points…

• Own occupation cover. This pays out if you can't do your own job. Some policies only pay if you can't do any job at all.

• The deferred period. Match it to your savings and any sick pay from work. If your employer would pay you for the first few months, a longer wait can save you money without leaving a gap.

• Guaranteed or reviewable premiums. Guaranteed premiums stay the same price. Reviewable ones start cheaper but can rise.

• What's excluded. Check what the policy won't pay for, such as any illnesses you currently have.

How to work out what you need

Start with one simple question: if your income stopped tomorrow, how long could you last? 

Add up your essential monthly outgoings first, the mortgage or rent, the bills, food and any loan repayments, then look at your savings and work out how many months they'd realistically cover. That figure is a good guide to the deferred period you can afford to take on. 

From there, think about the people who depend on you, because a partner, children or anyone else relying on your income raises the stakes and usually points towards longer, more secure cover. And be honest about the work you do. If it's physical, time off tends to arrive sooner and hit harder, so build that into your thinking.

It's also worth reviewing your cover now and then. As your income, family or mortgage change, the right level of cover changes too.

Speak to a Mab adviser

Income protection can be quite complicated, and as you're self-employed, insurers judge your income differently from one to the next. 

A Mab adviser looks across a range of insurers, explains what each will and won't cover, and shows you why a plan fits your income and budget, so you understand the reasoning, not just the price.

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