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Income protection for business owners

Owning your own business can be very rewarding and sometimes stressful. This can be true for any business, whether a sole trader, partnership, family business or a large limited corporation.

At the start of 2021, there were 5.6 million private sector businesses operating in the UK, with 5.5 million of these being smaller businesses.*

If you run a business, it is likely that the company will be heavily reliant on you to run smoothly. If it was necessary to take an extended period of sick leave, there could be a notable impact on both business and personal finances.

This is where income protection insurance could be extremely useful to have in place. Income protection is designed to pay out a monthly tax-free lump sum if unable to work for long period of time due to illness or injury.

This can allow you peace of mind to recover at your leisure, knowing you will have an additional form of income in the event you need to it to support your personal expenses.

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YES – as a business owner you should be able to take out income protection cover.

In fact, it is advisable to take out this type of protection, as being unable to work could have a serious effect on both your personal salary and business income.

As well, as the owner of a business rather than an employee, it is unlikely you will have a sick pay scheme in place to cover your own earnings. You will also not be eligible to claim statutory sick pay (SSP).

Does income protection insurance pay out for business owners?

YES – business owners should qualify for an income protection insurance pay out if unable to work due to illness or injury.

This policy type will provide you with a tax-free payment direct to your bank account every month that you are eligible to claim. This will either be until you return to working as normal or your claim period runs out (usually 12 or 24 months depending on the policy terms).

Some common reasons for income protection insurance claims are:

  • Cancer
  • Heart attack
  • Stroke
  • Serious accidental injury
  • Mental health (e.g. stress, depression or anxiety)

Learn more about INCOME PROTECTION INSURANCE.

Speak to one of our experts to easily compare prices across a variety of great UK insurance providers. There are a lot of brilliant policies available, so there is a wide range of options for you to choose from.

The best way to make sure you are getting the most competitive pricing is by checking all the available deals for the cover you need.

We can do this on your behalf and provide you with the information as to which policies are the most suitable for you – saving you time, money and unnecessary hassle. We will source the best possible income protection quotes for you to choose from.

YES – there are some brilliant options available for business owner’s income protection.

You will not be eligible for statutory sick pay (SSP) if off ill, as you will be classified as self employed rather than an employee. This means you will not receive this additional support that is available to most UK workers.

You may be able to access what is known as an employment and support allowance (ESA), if you have contributed enough in national insurance plus other qualifying criteria.

However, the payments from this scheme can take up to 13 weeks or more to be properly approved and will be minimal compared to an income protection pay out.

How much is income protection insurance for business owners?

There are many income protection insurance policies that are extremely reasonably priced, even for business owners.

There are several ways in which you can reduce the cost of your policy. The easiest way to do this is to extend your deferment period.

Cheaper income protection insurance for business owners

There are ways in which you can lower the cost of a business owner’s income protection policy. This includes:

Age – Your age will affect the cost of your policy. It is best to put cover in place as early in life as possible as this often will mean lower prices.

Comparison – Comparing policies and prices across multiple providers can reveal a more cost effective policy.

Expert advice – Speak to an income protection expert for advice on how to save on your cover.

Smoking – If you smoke this can cause you to have to pay higher premiums. Quitting or cutting back could reduce the cost of your policy.

Health and lifestyle – lifestyle changes such as increased exercise or weight loss can reduce premiums.

Pre-existing medical conditions – speak to one of our experts for advice if worried your pre-existing condition will affect the cost of your policy.

Income protection is a very flexible insurance product and there are a lot of great options with varying levels of cover.

The best options for business owners include:

  • Short-term income protection insurance: will pay out for set time period (12 or 14 months generally). Usually lower priced than long-term cover.
  • Long-term income protection insurance: great for very long periods of sickness absence. The most comprehensive form of income protection available.
  • Guaranteed sick pay: generally cheaper than a full income protection policy. Will pay our for 6 months from the point of claim.
  • Personal accident insurance: the most cost-effective income protection policy. Pays out for hospitalisation over 24 hours, injuries and accidental death.

As a business owner, you may have access to significant funds if your business is doing well. This means you could potentially withdraw some of this capital to cover personal bills if unable to work and earn due to long term illness or injury.

You may however either be unable to do this or unwilling to, especially if you run a smaller business. This then leads to the question of how you will afford your own monthly expenses, especially if the business struggles to run smoothly in your absence.

An income protection claim pay out may be a much-needed boost when your usual source of monthly income may be disrupted. The additional funds accessed can be used to cover:

  • Mortgage or rent payments
  • Cost of living
  • Household bills
  • School fees
  • And more…

Guaranteed income protection will mean that you can definitely access great cover, regardless of medical history or lifestyle factors. This can be a relief to anyone who has medical conditions that could usually cause issues with accessing cover.

It is vital to remember though, you will be excluded from claiming for anything related to your pre-existing condition – but you can claim for anything unrelated that your policy covers.

The process of an income protection claim follows 4 straight forward steps. These are:

  • Contact your insurer
  • Complete a claim form (usually online)
  • Submit any medical evidence (if required)
  • Submit any financial evidence (if required)

Other business life insurance policies

If unable to work due to illness or injury, this may impact how your business runs day to day – and your profits.

Whilst income protection will help you to support your own personal expenses, if more concerned about business expenses there are other great policy types available. You also have the option of taking out life insurance through your business for tax purposes.

The 2 main types of BUSINESS LIFE INSURANCE are:

  • RELEVANT LIFE INSURANCE: a tax-efficient way to take out life insurance through your business. You can save up to 49% compared to standard life insurance with this scheme approved by the HMRC.
  • KEY PERSON INSURANCE: key person or “key man” insurance protects a business from financial difficulty in the event of the loss of a person key to the running of the company.

*according to Gov.uk

Useful resources for business owners

Gov.uk – HMRC – Business Income Manual

Gov.uk – Business and self employed

Help to Grow – Management Course

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