Income Protection Tips for the Self -Employed…

I think one thing we can all agree on is that nothing is assured to any of us. Over the past year, just like that, the economy changed, people who’d worked for companies for years were being made redundant and anyone working in retail or catering was left in financial chaos…

On top of dealing with the emotional side of the pandemic, the financial stress has been too much for many people (myself included).

If only I’d known that this was around the corner. It’s at times like this that I wish I had the income protection I deserved. It certainly would have made the last year a bit more bearable.

If there’s one thing I can take away from last year, it’s that I can prepare for the future. Hopefully not for another pandemic, but what would happen if I lost my job or I was too sick to work, what then?

I wouldn’t be able to support my children or pay the mortgage. What if I found myself as a single parent again? The rug would be pulled from under me again and everything would come hurtling down. I mean do we really know what’s around the corner?

As a self-employed copywriter, it’s also occurred to me recently that I have no cover for things like maternity leave, sick pay and pension payments. If I couldn’t work, I couldn’t earn money or pay into my pension for example and that really is quite frightening…

Finding that safety net

The way I look at it is this, if you found yourself in that awful position of not being able to earn any money, as I’m sure many of you have over the past year, how could you ensure you’d be protected?

Even if you are in employment, do you know how much your sick pay will be each week? Is it enough to cover your outgoings until you recover? Well, what if there was a way to make sure you had enough, would you take the chance of not having the protection?

Income protection can provide that safety net.

The ABI (Association of British Insurers) found in a study that 1 million workers in the UK found themselves unable to work at some point due to sickness, serious illness or an injury.

Income Protection Insurance

Tips for working out Income Protection cover…

1. Work out your (SSP) and how much your company will pay you if you have to stop working due to sickness.
2. If you’re self employed you should have the details of this worked out, but the reality is that you may not be able to pay yourself if you are sick.
3. Have a plan of how you will pay the bills if something goes wrong. You should always plan for every eventuality, having a back up plan will give you security and a direction to follow when things get tough.
4. If your employed you need to work out your income, sick pay and have all your details too hand.
5. If you’re self employed your monthly income will be based on your share of the pre-tax profits generated by your business.
6. Unlike life insurance it’s not based on whether you have a family or dependants. Income protection protects you so you can cover remortgage payments, bills etc.

• You’ll get between 50% and 70% of your salary until one of three things happen:

1. You go back to work
2. You reach pension age and retire
3. You pass away

How much you get will also depend on things such as lifestyle, hobbies and general health. Other things to consider is the size of your mortgage, your monthly repayments and if you have any loans to repay. Business owners, in particular, may have loans.

Income protection also covers a range of health issues including back injury, cancer and heart disease, so the assurance you will get covered is there.

TOP TIP: The longer your deferral period – (which is how long it’ll take between you making the claim and beginning to receive your payout) The longer your deferral rate is the cheaper your premiums will be.

An afterthought

I would just like to say, that the financially devastating year that many of us have experienced has been a shock to all of us. If you have been through a tough time, give yourself a pat on the back. It has been a big challenge, I wish you the best of luck navigating out of this time.

Making sure you protect yourself for the future and have a backup plan is going to be your route out of here and give you that financial safety net that you need for your own peace of mind.

For my business owners and my self employed friends out there, make sure you get some essential business cover, I want to see you succeed!

Thanks for reading,

Soph.

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