If you recently started a business, you might be wondering “How does income protection work for newly self employed?” This blog addresses that question and more.
If you’re self-employed, it’s essential to have some form of income protection in place. Income protection insurance is a great way to ensure that you’re taken care of financially should you be unable to work due to injury or illness. It can help you recover and get back on your feet again if you’ve been out of work for a long time. But how does income protection work for newly self employed? Let’s find out.
What is income protection for the self-employed?
Self employed income protection insurance is a type of insurance that pays out a monthly benefit if you cannot work due to sickness or injury.
When you work as an employee, your employer takes out a policy on your behalf and pays for it. But when you work for yourself, it’s up to you to ensure that your finances are protected if something happens.
In the UK, there are approximately 4.23 million self-employed people. Over 50% of these people lack insurance policies such as business life insurance, critical illness cover, private medical insurance, relevant life insurance or life insurance in place.
That means that there are many people out there who are putting their entire livelihood in jeopardy by neglecting to protect themselves financially.
What does a self employed income protection cover?
Income protection covers your earnings if something happens to you and prevents you from working for some time. This could be because of an illness or injury, but it could also be due to other reasons such as taking time off to care for a family member or going on maternity leave. Some policies may cover you if your business is struggling and need time off to restructure.
How does income protection work for newly self employed?
It works in the same way as it does for employees. You pay a monthly premium, and when you become sick or injured, you may be able to claim a benefit. The insurer will then make a payment to your bank account each month until you’re well again, allowing you to continue paying your bills and keep up with mortgage payments.
The most important thing to understand is that income protection is not the same as Life Insurance. Life insurance helps people who have dependents or other financial obligations after they die. Self employed income protection insurance allows people who are still alive but can’t work because of an injury or illness.
If you’re injured and unable to work, the money from your income protection policy will be paid out directly to you to help cover expenses like rent and food while you’re off work recovering from an injury or illness. It won’t be paid to your partner or family members.
Do you really need self-employed income protection?
Yes, you do. It’s estimated that 300,000 people in the UK leave their jobs each year due to health problems, and this number is growing. Many of these people are self-employed and have no access to sick pay or other benefits. So if they’re out for a long period, it could be financially devastating to their families and businesses.
How much does it cost?
The amount of money you receive each month will also depend on how much income is protected. If you want to make sure that you are receiving the right amount of income, it is good to speak to an insurance broker who can help you find out more about this type of income protection cover.
Here are some factors to consider when choosing an income protection policy:
Payout length: This is the length of time you’ll be paid out if you cannot work due to a sickness or injury.
Deferral period: This is the time that must pass between the date you start making claims and the date you can make another claim against your policy.
Current age: Your age at application will affect how much your premiums cost, so it’s essential to be realistic about how old you are when applying!
Sum assured: The amount of money that will be paid out each month if you cannot work due to illness or injury.
Policy cease age: The age at which your policy will no longer pay out benefits if you are still unable to work due to illness or injury at that point in time.
If you’re interested in finding out more about how business income protection for the self-employed works and whether it might be suitable for your situation, contacts us today!