What is Income Protection insurance for contractors?     

Income Protection is a key policy to think about as a contractor who is running his or her own company. It makes sure that you do not have to dip into your savings if you are not able to work.

What’s more, when you work for yourself, you do not have a safety net. By this, I mean in terms of sick pay or financial support from an employer. Income Protection is, in effect, sick pay for Contractors. It enables you to meet your mortgage payments, bills, and lifestyle needs. There may come a time when you may need this if you cannot work or earn due to an illness or accident.

Some other policies that are specifically for contractors and may be worth considering are:

• Contractor mortgages   
• Contractor insurances in general 
• Critical illness  
• Relevant Life Insurance   

Now, back to income protection insurance for contractors. If you invest on a personal basis (or via your own company) into an Income Protection insurance for contractors policy, you will have a safeguard to protect you and your loved ones. This protection would be required if you fall ill and you are not able to work. This type of policy will pay you a monthly income while you are not able to work. What’s more, these policies tend to be very fairly priced.

What should you consider when considering contractor income protection insurance:     

In a perfect world, you will look to use a provider who has experience in the contracting market. They should also be aware of how contractors work and officer contractor income protection insurance. Some key points to note are:

• Please make sure that the provider will include dividends in any calculations. You need to show this because they make up the bulk of most of your income. Some providers will consider dividends to be ‘investment income’ rather than normal income. Therefore, this explains why you should seek the right provider. They should have the experience of dealing with small companies and freelancers. 
• You will need to do further checks on any contractor income protection providers you compare. They should have good records of dealing with and meeting past claims. Your adviser will be able to help you with this. 
• Your policy must clearly state that you will receive the benefit if you are not able to carry out your occupation (as a contractor). If you do not give your job when you apply, the provider may claim that you are still able to carry out a different type of work, even if you are not able to perform your contract duties. Therefore, this is a crucial point to note. 
• Please make sure that your policy covers you until you plan to retire. 
• You also need to make sure that your policy is inflation proofed. 

The benefits of Income Protection insurance for contractors   

1 Regular income

You will receive part of your taxable income if you are not able to work due to an illness or accident. The income is usually between 50 – 70% of how much you pay yourself.

2 Premium Guaranteed

Your premium is guaranteed. What you pay each month for your policy will not change if you claim and then go back to work. What’s more, you do not pay while you claim either.

3 Continued support

The policy will pay out until you are medically able to work again. If you cannot go back to work the policy will continue to pay out until you retire, pass away or the policy term ends*

4 Everything’s covered

It covers you for all illnesses or accidents, which means that you are not able to work. It is about your ability to do your job, not your illness. This policy is not like other personal insurance policies.

5 Tailored to you

The contractor income protection policy will fit with your income and outgoings. This way, you can be confident that you are always in the clear and will meet the payments that you need to.

6 Financial Security

No matter what happens in the future, Income Protection will make sure you and your family will be financially secure. To sum up, you will not be out of pocket if you are out of action.

* This is dependent on level of benefit taken

Advice

Income protection insurance for contractors is an important policy to think about in case you are not able to work in the future. Many contractors choose to take this out to cover themselves should the unfortunate happen in the future. If you are thinking of taking out contractor income protection insurance, you should use an adviser that has experience in this area and refer to my points above.

If you would like to request a quote for contractor income protection insurance, please contact Broadbench. To do so, please click this link and book an appointment with one of their expert Contractor protection advisers. Please note, the link above has currently expired and a new one will be replacing this very shortly.

Link to Contractor Advice UK group on LinkedIn    https://www.linkedin.com/groups/4660081/