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Income protection insurance for self-employed people
Income Protection Insurance for Self-Employed People:
An Introduction

If you own your own business, work for yourself, or work as a self-employed contractor then you may find that standard income protection insurance and permanent health insurance policies may not be the best fit for your needs. The fact is that many income protection insurance and permanent health insurance will not pay out comparable benefits to people who are not in full-time employment or they may not cover them at all.

Your best option, then, will be to look at specialist coverage that will give you all the income protection insurance for self-employed individuals that you need. The major benefit of taking out income protection insurance for self-employed people is simply that the policy will be designed for your own particular circumstances and, as such, you stand a far greater chance of getting the benefits you pay for when you need them!

What to watch for

You may find that not all income protection insurance for self-employed policies in this particular sector of the insurance market will cover the same people for the same range of benefits. So, it is absolutely vital that you check that you qualify first of all for the coverage on offer. If it turns out that you do not actually meet a qualifying criteria when you need to make a claim then you may well be turned down—even if you have made all of your premium payments. Other issues worth thinking about include:

  • Redundancy/unemployment:  It is unlikely that a self-employed person will get a payout for this, so there is probably no point taking out income protection insurance for self-employed policy that covers these issues unless they will apply to your circumstances.

  • Payment percentages:  The way that income protection insurance for self-employed or permanent health insurance pays out can vary from insurer to insurer. You may need to show your accounts for a certain number of years before the insurer will assess the payment that may be made. Obviously, the more years the insurer will consider, the better off you will be if your income fluctuates year on year. In many cases, the payment that is made will be based on pre-tax profits after the deduction of your business expenses and any benefits to which you are entitled; you need to be sure that you can prove this information before you will qualify.

  • Payment start times:  Many income protection insurance for self-employed policies are designed to start paying out after a specific period. This is usually based on the fact that employers will carry on paying all/part of a salary for a while when you are unable to work. Obviously, it is better for you not to have a deferred payment start date, but to arrange for payments to start as soon as possible.

  • Ability to work:  It’s important to check what criteria the insurer uses to assess whether you cannot work due to illness or injury. Some will cover you if you cannot do your own job while others only if you cannot work in any job at all. So, it’s important to get the right kind of permanent health insurance coverage.  Some policies may even ask you to prove that you have closed down your business before you will qualify for payments.

Given that income protection insurance for self-employed people is a lot more important than it is for people who are employed (and who may receive some benefits from their job) it is very important for the self-employed to think about taking out income protection insurance or permanent health insurance.

And, it is just as (if not more) important that you look at the right income protection insurance for self-employed policy to suit your needs. Make sure that you qualify for the terms of the policy and that your self-employed status will not stand in the way of your getting the benefits for which you pay your income protection insurance and permanent health insurance premiums.

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