Reader Question: Can I get income protection insurance if I am self-employed?
What is income protection insurance?
Income protection insurance is designed to replace a percentage of your income if you are unable to work due to illness or injury. The policy will pay out a monthly amount which can be used for any purpose but typically is used to cover mortgage payments and household bills. Income protection insurance can be either a short term or long term policy with premiums payed monthly.
Is income protection cover available if I am self employed?
Yes, income protection cover is available for both employed and self employed workers. Most insurers will require evidence of income levels as the maximum cover is based on your current income.
How much of my income will be covered under an income protection policy?
The level of cover is typically 50-70% of current income, the higher the amount covered the higher the premiums.
What other options are available under an income protection policy?
There are two main options available under an income protection policy:
- Deferred period - this is the period you will have to be off to work before the policy will start paying the benefits, this can be from 7 days to 12 months, for the self employed the choice of deferred period may be limited
- Period of payout - short term plans will pay benefit for a maximum of 24 months, long term plans will continue paying benefits until you return to work or the policy ends
The selections made under these options will affect the level of premiums paid
Should I buy income protection insurance as a self employed person?
There are a number of factors to consider before you buy an income protection policy if your are self employed
- The premiums can be expensive so make sure the outgoings are within your budget
- Do you have savings that could tide you over if you are off work, if so you could purchase an income protection policy with a longer deferred period
- Check any existing policies you have to see if you are already have some income protection cover
- Look at reducing the cost of income protection insurance by reducing the level of cover to a minimum
