Income protection can provide long-term financial protection against the risk of sickness and injury and is not just for those in employment. Individuals who are self employed or even unemployed may also be able to apply for income protection insurance if they fulfil certain criteria.
It could perhaps be argued that income protection is more important for those who are self-employed and rely on the income they generate from their business to survive. The self-employed are not protected by the safety net of their employer’s paid sick leave and may have to get by on less than £100 a week state support.
Income protection for the self-employed provides you with a regular tax free income if you are unable to run your business due to illness or injury.
The monthly benefits from a self-employed income protection policy pays out on the same principle as a standard income protection policy and can be used however the policy holder so chooses. The benefits are usually used to pay for regular monthly expenses, such as mortgage payments and utility bills.
With a standard income protection policy, those in employment can usually protect between 50-70% of income. Earnings are calculated differently for those who are self-employed and are determined by your share of the annual pre-tax profits. This is the total income from the business less any expenses from running that business.
If you have been self-employed for:
- more than 36 months – your benefits will be based on your yearly earnings based on your average yearly pre-tax profit over 3 years prior to incapacity.
- less than 36 months- your benefits will be based on your yearly earning based on your average yearly pre-tax profit during the period of self employment prior to incapacity.
Endsleigh’s qualified financial advisers are independent, meaning they aren’t tied down to any providers in particular and are able to search the market of your behalf. Before our advisers begin their research they gain a full insight of your needs and circumstances to ensure your income protection policy is the most competitive and suitable available.
