There’s lots of benefits of being self-employed including the level of freedom that comes with being your own boss. But one of the biggest disadvantages is not having the financial safety net that’s commonly associated with traditional benefits for employed workers. In short, if self-employed individuals don’t work, they won’t make any money.

When self-employed people are unable to work because of injury or illness, it throws a whole other set of obstacles into the mix too. There is a solution though and it means you could enjoy a monthly salary even if you can’t work.

Income protection insurance: the definition

Income protection insurance is designed to provide individuals with monthly payments if they can’t work because they’re ill or injured. The aim is that the monthly income can replace up to 50-70% of your standard monthly income, helping you to keep up with your normal life and expenses. Most insurance providers will also help you to access the support you need to get back to work quickly if you do need to make a claim.

Income protection for the self-employed

Income protection might not be right for everybody but, if you’re self-employed, it pays to ask yourself the following questions:

• If you can’t work because of injury or illness, will you cope with a loss of earnings?
• Do you have any savings that could help you get by without a regular income?
• Would your business suffer if you couldn’t work?

If you’re unsure how you would cope financially, income protection insurance might be a wise investment. What’s more, depending on the policy you choose and the provider, you could receive a monthly income until you’re fit to return to work (short term or long term), for a set period, until the end of the policy or until you reach retirement age.

Just like other insurance policies, when you take out income protection, providers will ask you a few questions to determine the right level of cover. With this type of insurance, you can typically choose how much money you’ll receive after a successful claim, how long the policy lasts for and how long the deferred period is. Most insurers also allow you to make as many claims as you like during the policy term. Whether or not these are successful though is down to your provider.

The benefits of income protection for sole traders

Unfortunately, there’s no SSP or Statutory Sick Pay for self-employed individuals. The government does offer Employment and Support Allowance of up to £117.60 per week if you can’t work due to illness or injury – but it’s likely your mortgage or rent payments and general living expenses are higher than that.

With the right income protection policy in place, self-employed individuals can expect to receive monthly tax-free payments of up to 70% of their average income. This could be used to pay for rent or mortgages, day-to-day expenses, and even outstanding debts.

Choosing the right level of cover

As a sole trader, your monthly income might vary making it difficult to determine how much insurance you need. At Moore Health & Protection, we always advise individuals to note down their monthly expenses that they’d still need to pay – even without any earnings. Armed with this knowledge, as well as some details about your job, age, health, and lifestyle, we can scour the market to find a few different options.

Before choosing your cover, it’s important to be aware of the terminology used in each policy. Some providers will pay out if you’re unable to do your current job but other policies state that if you can return to another, more suitable role, you should. Don’t worry though as we take away the stress and jargon associated with personal protection to make protecting your financial future easy.

We’ll also advise on other types of insurance including life insurance, critical illness cover and mortgage protection insurance if we think these alternatives best suit your situation. Many of our clients also find that their monthly premiums are much less than they had thought. So, whether you’re new to the health and protection world or want to review an existing policy, why not pick up the phone? There’s no fee payable when you get in touch so what have you got to lose?Moore Health & Protection is a trading style of Tony Moore which is an appointed representative of The Right Mortgage Limited. The Right Mortgage Ltd is registered in England and Wales no. 08130498. Registered Address: 70 St. Johns Close, Knowle, Solihull, England, B93 0NH.