We recently looked at how lone business owners can easily save for their retirement using the new Lifetime ISA and their own workplace pension scheme. You can see that blog by clicking here.
This week, we are taking a similar review of how you protect yourself financially if you are unable to work.
As someone who chose to run their own business, you are used to making your own financial decisions. You understand that there are increased risks as well as some increased potential benefits from being your own boss. Yes, you are prepared to work hard, come what may. But it is unwise for anyone to take good health for granted.
One of the biggest risks to your plans as a self employed person comes if for reasons of illness or accident you couldn’t work. There’ s no company sick pay when you own the company, and without you working, there probably would not be a company for very long.
Could you cope with your regular outgoings if you lost your income? The bills don’t stop coming in just because an income does. Being unable to cover everyday expenses is bad enough, but what about your mortgage payments?
State aid? You would be unpleasantly surprised at how little is likely to be forthcoming. Some of your creditors may be understanding, but sooner or later they would have to start taking legal action to recover the sums due. They may not be able to get blood out of a stone, but your mortgage company could certainly get you and your family out of your home.
You may have savings – but it is surprising how quickly you can find yourself going through them if you have lost your usual income. We all think it will never happen to us, but none of us really knows what is around the corner. Accident and illness can strike anyone at any time. If you are self employed, you need to be prepared for the unexpected – fortunately, there are some personal insurance products designed for self employed people.
Self Employed Income Protection cover
Self Employed Income Protection is insurance designed to bring a regular monthly income if your health does not permit you to work. It can pay out until you are fit enough to return to work or reach your retirement age. The actual amount you receive each month depends of course on the type of policy you choose and the cover you have paid for. It could be a sizable percentage of your usual monthly earnings if you so decide – and if you want to avoid making unpleasant changes to your standard of living this is probably the level of protection you should think about.
As you might expect, to make a successful claim, you will need to provide support for your position through medical evidence.
You can choose many of the details of the cover you have. Normally there is a waiting period before it starts paying out. If you have enough savings to tide you over for a short period when you first become ill, you can reduce the cost of the insurance by opting for a longer waiting period.
Typical policies of this kind cover certain severe illnesses and you will probably have the option to include cover if you can no longer work due to an accident.
Critical Illness Cover
Critical Illness cover is designed to pay out a tax-free lump sum if you are diagnosed with one of the serious illnesses covered by your insurance policy, usually including some cancers, heart attack and stroke. It’s designed to pay off debts or a mortgage or pay for any adaptations needed to your home – for example, so you can use a wheelchair. Only selected conditions are covered by these policies and common illnesses that keep people off work such as back problems and stress are not covered.
Life insurance is a must for anyone with dependants, and will pay them a lump sum, or regular payments, if you die. Death-in-Service benefit is part of the salary package for many employed people. As a self employed person your risks are just the same, so it makes sense to provide your loved ones with this kind of protection.
With Income Protection Insurance, everything depends on getting the right policy – so it’s best to get advice from an independent financial adviser or broker.
Simply contact us at Continuum for the help you need.