Income protection Insurance for contractors: What you need to know
As a contractor, your income depends entirely on your ability to work. Unlike permanent employees who enjoy benefits like sick pay and holiday pay, you’re on your own. If you can’t work, you don’t get paid. Income protection is a vital safety net to ensure you’re covered when the unexpected happens.
Why should contractors have Income Protection Insurance?
Income protection is designed to safeguard the lifestyle you’ve worked hard to build. Here’s what it offers:
- Monthly payments: Provides a steady income after your chosen waiting period.
- Long-term protection: Keeps you covered until retirement age, offering lasting security.
- Replaces lost income: Covers up to 65% of your earnings if illness or injury prevents you from working.
- Tailored coverage: Policies can be customised to suit your career stage and financial goals.
With income protection, you can endure the challenges of contracting and stay financially stable even during periods of incapacity.
How does Income Protection work?
As a permanent employee, you may have benefited from up to three months of sick pay or leave. Contractors, however, face financial risk from the very first day they’re unable to work.
Income protection steps in to fill that gap. By paying regular premiums, you secure a plan that provides financial support if you’re unable to work for an extended period. This ensures that you can focus on your recovery instead of worrying about bills piling up.
The waiting period—the time between when you stop working and when your policy starts paying out—affects your premiums. A longer waiting period reduces the cost but requires you to rely on savings in the meantime. Advisors can help you find the right balance based on your financial situation.
What to Consider When Choosing a Policy
There are countless income protection policies available, but not all are created especially for contractors. When selecting a plan, consider the following:
- Provider reliability: Look for insurers with strong financial stability and proven claims histories.
- Income definition: Ensure the provider counts all sources of your income, including salary, dividends, and bonuses.
- Payout duration: Check how long the policy will pay out while you’re unable to work.
- Support for recovery: Some providers offer assistance to help you get back to work when you’re ready.
Cost is important, but it’s equally vital to choose a policy that truly protects you. A plan that doesn’t pay out when you need it most isn’t worth having.
Navigating income protection policies can be daunting, but you don’t have to do it alone. Consider how your life would change if illness or injury prevented you from working long-term. By planning ahead, you can protect your income, secure your lifestyle, and gain peace of mind for yourself and your loved ones.