Income Protection for the Self-Employed

Being self-employed means you usually lack the benefits of an employer safety net if you can’t work due to illness or injury. Here, we’ll cover what self-employed people need to know about income protection insurance. We’ll explain how it works, the types of policies available, and where to find the best cover for your situation.

Can you get income protection if you’re self-employed?

Yes, it’s definitely possible. However, the process can be slightly different and a little bit more complex compared to someone who’s an employee of a company. Income protection means you can still get regular monthly income, usually a percentage of your pre-tax earnings, if you can’t work due to illness or injury.

Types of policies available

There are a few different formats of self-employed income protection policies, here are the two main options:

• Long-term income protection insurance: This protects you if your ability to run your business and generate earnings stops due to sickness or injury. You can receive a portion of your earnings as a regular monthly payment until you can return to the business, reach retirement, or the policy ends.

• Short-term income protection insurance: Usually, these policies will only pay out for 12 or 24 months (or another pre-agreed amount of time). They provide limited cover if you can’t continue with your self-employed business, but the policy premiums are usually cheaper.

How much cover can you get?

Self-employed income protection usually covers a percentage of your average monthly gross income, typically up to 70%. The exact amount depends on the insurer and the level of cover you choose.

When working out how much cover you can get, insurers will often look at your average earnings over the last one to three years. So, it's worthwhile having updated company accounts or self-assessment tax returns (SA302s) ready before taking out a policy.

Cost of self-employed income protection insurance

How much your self-employed income protection insurance will cost is usually linked to a number of factors, such as:

• Your business: Higher-risk industries like some types of construction (perhaps electricians working on dangerous sites) generally have more expensive income protection premiums. Whether you’re a sole trader, company director, in a partnership, or a contractor can also impact the cost.

• Your age: The older you are, the higher your premiums will be compared to younger applicants (all else being the same).

• Health and lifestyle: Your premiums could get pushed up if you have pre-existing medical conditions, if you’re a smoker, or if you regularly participate in extreme hobbies like rock climbing or scuba diving - and anything else that puts you at a greater risk of illness or injury.

• Level of cover: Most insurers will let you choose how much of your income you want to replace (within a certain range). Replacing 70% of your income will likely cost more than replacing 50%, but it’s worth shopping around because prices vary across insurers.

• Deferred period: Most policies have a deferred period before payments start kicking in, this is basically the time you wait before the policy pays out, and a longer amount of time (60 days instead of 30 days, for example) usually means lower premiums.

• Policy length: Short-term cover for a fixed period of time will usually cost less than long-term income protection insurance, which replaces part of your income indefinitely (until you can return to work or retire).

Get an income protection quote online

If you’re looking to compare self-employed income protection insurance quotes online, you might find it complex and confusing. There are variations of income protection, and the right policy will depend on your circumstances and business.

An insurance advisor can quickly provide accurate quotes, often faster than online platforms. This is because an advisor can determine the correct type of cover for your company. A brief conversation lets them understand your unique position and then match you with the best self-employed insurance policy.

Ready for a free, no-obligation chat with an advisor specialising in self-employed income protection insurance? You can get started here:

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Best UK income protection insurance providers

The best provider to use for self-employed income protection insurance will depend on your business and the level of cover you need, but here are some examples of popular providers in the UK:

• Aviva: As long as you work more than 16 hours each week, you can qualify for Aviva’s income protection insurance if you’re self-employed. The policies can last from 5 to 52 years (or until you reach 71), but payments can only be between £500 and £1,500 per month.

• Vitality: You can get between 50% and 60% of your average monthly income with a Vitality self-employed income protection policy. The polices are designed for the long-term and pay until you return to work or retire. You must be out of work for at least 4 weeks for the policy to start paying after your deferred period.

• LV=: With Liverpool Victoria’s income protection policies, they offer a guaranteed £1,500 benefit, which can be particularly helpful if you’re self-employed and your income tends to fluctuate. Or, they can look at working out your average income over 36 months instead of 12 months.

Keep in mind, income protection policies vary in terms of the costs and benefits. The best way to see all your realistic options is to get a specialist advisor to show you what’s available.

Alternative types of insurance to consider

Alongside income protection insurance, here are some other types of insurance worth considering if you’re self-employed:

• Critical illness cover: If you get a diagnosis for a serious health condition, critical illness cover can provide a lump sum payout. The illnesses that are covered, like cancer or heart disease, varies between policies.

• Business protection insurance: Where income protection helps with your general living costs, business protection insurance can provide financial support to help with costs related to things like business loans or losing key members of staff (sometimes called key person insurance).

• Personal accident insurance: This provides a lump sum payout if you get seriously injured or hurt, inside or outside of work. However, sometimes certain types of activities may be excluded by some insurers.

• Life insurance: Although this won’t support you if you temporarily stop working, life insurance will provide a lump sum payout to your family (beneficiaries) if you were to die.

• Health insurance: With private healthcare insurance, you might find you can return to your business quicker than if you have to rely on potentially long waiting times with the NHS.

Why choose Teito for your income protection cover?

Finding the best income protection policy if you’re self-employed isn’t always straightforward. Your business and individual lifestyle factors will be unique, but expert support ensures you get cover that works for you, at a reasonable cost.

Our experienced advisors can find you the most suitable and affordable self-employed income protection policy. They can do this because they have extensive knowledge of specialist insurers offering the best income protection options for any type of company or self-employed applicant.

Here are some more of the reasons people choose us to find them self-employed income protection insurance:

• We can get tailored quotes for self-employed income protection

• Our advisors have 5-star ratings on leading review sites

• Your first chat is free, with no obligation to proceed

• Access to specialist insurers with exclusive deals for the self-employed

Ready to take advantage of a free, no-obligation chat with an advisor specialising in income protection insurance for the self-employed? Get started here.