It may seem like a strange topic to be discussing at this time of year. Still, the truth is that many small business owners often overlook the importance of protecting their income if they become unable to work due to illness or injury.
This information will help you make an informed decision about whether or not income protection might be worth looking into for your business.
WHAT IS INCOME PROTECTION?
Income protection is a type of insurance that helps protect you if you can no longer work because of an illness or injury. This type of policy can help ensure that you still have some income coming in, which can be helpful if you are self-employed, or need self-employed mortgages.
If you are self-employed, it is essential to ensure you have a long-term income protection plan in place. For example, unlike someone who is employed and could receive up to 6 months full sick pay, the self-employed do not have anyone to fall back on. As all policies should be bespoke to your needs and circumstances, it is important that you speak with an independent financial specialist before taking out a policy on your own.
HOW DOES SELF EMPLOYMENT INCOME PROTECTION INSURANCE WORK?
In a nutshell, the policy pays out a monthly income to you if you can’t work due to illness or injury. Payout usually kicks in after a waiting period of around 30 days to 6 months and pays out a percentage of your average monthly income which is usually around 60%. It’s important to note that it won’t cover any business losses.
It’s important to note that income protection for the self-employed is available only as an add-on policy or rider with another type of insurance such as life insurance or disability insurance.
WHAT ARE THE BENEFITS OF SELF EMPLOYMENT INCOME PROTECTION?
There are a few key benefits of having self employment income protection in place:
- Protection against unexpected illness or injury – If you’re unable to work due to an illness or injury, your income protection policy will help to cover your expenses and can help ensure that you don’t fall into financial trouble and help you continue paying your bills while you’re recovering.
- Protection against lost income – While some self-employed people may be able to rely on savings or other sources of emergency funding when they need it, others will not have the savings in place that would allow them to do this. If you were to experience an unexpected loss of business income, your self employment income protection policy could help make up the shortfall.
- Peace of mind – knowing that you have a policy in place can provide peace of mind if something happens and you’re unable to work. That can be especially important if you’re the primary breadwinner in your household.
HOW MUCH DOES PROTECTION COST?
There is no definitive answer to this question. The cost of income protection will vary depending on the monthly benefit, the deferred period, and general health. However, it is generally advisable to have some form of coverage in place if something happens and you are unable to work.
Remember that income protection is not a substitute for health insurance. It will only help you if you cannot work due to an illness or injury. So, be sure to check with your provider to see what coverage is available and how much it would cost.
It is always worth thinking about how you can protect yourself against the risks of self employment. For example, it might be tough to pay your bills or meet your mortgage payments if your income drops.
It’s vital that you get covered in case something like this happens, and self employment income protection can be a great way to do this. Make sure you take the time to research your options and find the right policy for you – it could be the best decision you ever make.