Self-employed income protection insurance
What is self employed income protection insurance?
Income protection insurance pays out a tax-free monthly benefit should you have to take time off from your business due to sickness or injury. Income protection plans are extremely comprehensive covering practically any medical condition that prevents you from working, including stress, back conditions, heart disease and cancer.
Do I need self employed insurance?
Individuals who manage their own businesses rely on the income they generate themselves from their business to survive. The self-employed are not afforded the same level of protection as those who are employed.
Self-employed do not receive sick pay or gain from employer-provided income insurance as part of an employee benefits package. With government incapacity support of only £95.15 per week (Employment and Support Allowance) it is vital to seek earnings protection from the private insurance market.
The payout from a self employed sickness insurance plan can be used for whatever purpose the policyholder decides. The main uses of these funds are to pay for regular monthly outgoings, such as utility bills and other living expenses.
Income protection for sole traders
It is very common for the self-employed to set themselves up as a sole trader. With this set-up it is most appropriate to take out a personal plan covering up to 65% of gross personal earnings. The monthly premiums should be paid from a personal bank account and the benefit would be paid back in to that account tax-free. In other words, the monthly premiums should not be expensed.