6 Reasons the Self Employed Should Have Income Protection

Working for yourself is great, but the reality is that you don’t have an employer who’ll pay you sick pay to fall back on should you become ill.

Most employed people are at least entitled to Statutory Sick Pay if they’re off work sick, with many employers offering enhanced sick pay over and above the legal minimum.

However, this simply isn’t the case when you’re self-employed.

As a result, if you are unable to work for an extended period of time due to an injury or illness, you will need to use government benefits if you do not have appropriate savings.

There are a range of government benefits available, but the main one is Employment and Support Allowance, which is worth just £90.50 per week.

This is far below the weekly expenditure of most households and, even if you are eligible for other state benefits depending on the nature of your disability, it’s unlikely you’ll be able to make up your full outgoings with state benefits alone.

This is where Income Protection can kick in to pay out a proportion of your wages to ensure you can continue to meet all your essential monthly bills should you ever find yourself out of work.

UK household savings has been in a sorry state in recent years.

The UK savings ratio hit a record low in 2017 and despite being on the rise again in 2018, recovery is slow and 2018 didn’t show much of an improvement.

Our Protection Survey showed over half of households would not be able to survive financially for more than 3 months if they did not have their main household income.

With insurer LV’s claims figures suggesting their average claim payout length is 7 years, the UK workforce is simply not prepared financially to cope with long-term illness such as those most commonly triggering Income Protection claims.

What’s more, for self-employed professionals, savings can mean a lot more than just having some spare cash set aside for a rainy day.

Without an employer, self-employed workers do not have a workplace pension, so many use their savings to afford retirement.

This means that every pound spent covering their income if they can’t work is a pound taken from their retirement fund.

Many self-employed workers in the UK are eager to get back to work once they are well enough because they’re doing what they love. That’s the reason they became self-employed in the first place.

Yet while there are a lot of reasons to want to get back to work as soon as possible, with a long-term health problem this transition back into working life isn’t always easy.

Income Protection Insurance providers offer a range of additional services and benefits to help you cope with difficult situations and get you back to work as soon as possible.

These can include:

• Back to Work Benefit
  Some providers offer to pay a reduced benefit if you can only go back to work on reduced hours and your earnings are comparatively lower than before your illness or injury
• Fracture Cover
  Receive lump sum payments after suffering a broken bone on top of whatever you’d be entitled to for being out of work with that fracture.
• Hospitalisation Benefit
  Get a cash benefit for every night you have to spend in a hospital as an inpatient
• Remote GP Services
  Access to video consultations with a GP from the comfort of your own home
• Best Doctors
  Receive a second opinion on your diagnosis from the best doctors from around the world
• Counselling Helpline
  Helpline for personal and legal matters, including on coping with mental illness and bereavement.

Many self-employed professionals find it difficult to step away from work when your business and income depend solely on you putting in the hours.

However, life doesn’t always make these long-term commitments easy to manage.

If your spouse or children suffer from health problems, there are ways in which an Income Protection policy can help them as well as you.

Some insurers, to start, extend their support services to cover your family as well.

• Death Benefits
  Will pay out a lump sum to your family if the policyholder dies during the term of the policy
• Carer Benefit
  Will provide you with benefits if you need to leave work to become a carer for a loved one
• Bereavement Benefit
  Provides a lump sum benefit should you suffer the loss of your spouse, partner or child

There is a range of products available to self-employed workers that may offer them financial support if they are unwell, one being Critical Illness Insurance.

However, Critical Illness Cover has certain limitations that Income Protection does not.

Critical Illness Cover will pay out a lump sum if you suffer from one of a set list of critical illnesses rather than on anything that medically prevents you from working.

That lump sum upfront may sound more appealing than a monthly income, but it may not last for the rest of your working life if you could never work again.

Rather than paying out just a lump sum, a Long-Term Income Protection policy has no limit on the amount of times you can claim or how long your claims can last.

This means that if you suffer from a particularly severe health problem that takes you out of work for a very long time or indefinitely, your policy will continue providing you with benefits until you are either well enough or until you retire.