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Income protection for freelancers

Freelance work is a common type of self-employment which allows you certain levels of freedom over employed work. As a freelance worker, you will have autonomy over how, when and where you work, which can be ideal for some people or professions.

There are currently around 4.29 million self-employed workers in the UK, with many of these choosing to work on a freelance basis.*

What are the risks of freelance work?

Freelance work has many perks and upsides, but there are also certain risks that you must be aware of.

Risks for freelance workers:

  • No Statutory Sick Pay (SSP)
  • No employer benefits
  • Employer pension schemes
  • Income will stop if not able to work

Ultimately your income relies solely on you, and therefore it’s important to protect that for periods where you can’t work.

Income protection insurance is a great safety net to have in place under these circumstances. Income protection will provide you with a tax-free lump sum every month that you are unable to work, supporting you in paying your bills until you have recovered.

YES – freelance workers will be able to receive income protection cover. Self-employment is not a barrier to great income protection and in fact without a set employer you would stand to benefit greatly.

Statutory sick pay (SSP) can only be accessed if employed on either a full or part time contract with an employer, meaning those who work on a freelance basis will be unable to receive this.

Without SSP or any form of work sick pay scheme, you could end up in financial difficulty with no steady stream of income to support yourself if unable to work long term.

The funds received from an income protection claim could be a vital lifeline under these circumstances.

The monthly payments can be used to cover expenses such as rent or mortgage repayments. These payments will continue until the end of the claim period (usually 12 or 24 months) or when you are well enough to return to work.

Does income protection insurance pay out for freelancers?

YES – an income protection policy will pay out even if you usually work on a freelance basis.

Income protection cover works similarly to critical illness cover except that policy type pays out one larger lump sum.

Income protection supplies you with a steady stream of income over many months, allowing you to continue paying for any important monthly expenses as normal.

There are several common reasons people are unable to work longer time periods, leading to income protection claims. These include:

Compare income protection insurance for freelancers

The best way to find a great price for your policy is to compare available insurance products across providers – and even compare individual policies from the same provider.

You may not get the full picture with other companies, but we have access to a wide range of providers and policies. This means we have a greater variety of choice and can find the perfect policy for any applicant.

With so many options for cover, it is always a good idea to get advice from an income protection expert.

YES – there are a variety of great options when it comes to income protection insurance for freelancers.

Without sick pay as a safety net, you may be forced to rely on loans or savings if unable to work due to illness or injury. This is not an ideal situation, particularly if your recovery takes far longer than expected.

How much is income protection insurance for freelancers?

There are some very reasonably priced options available for income protection cover. You will often be able to find a great policy at a much lower price than you might expect.

There are various ways to lower the cost of a policy, from extending your deferred period to simply taking out less cover or cover for a shorter period of time.

Cheaper income protection insurance for freelancers

There are several things that may affect the cost of an insurance policy. It is wise to consider all of these before taking out cover to ensure you’re getting the best possible deal.

Factors that might influence your policy pricing includes:

Age – insurance policies will generally be cheaper the younger you are when you take the policy out.

Comparing providers – a great way to reduce costs is by comparing the pricing across insurance providers. Comparison can often reveal one or two lenders with significantly lower pricing for the policy you require.

Get advice – an income protection expert will be best placed to advise about which policies are the best for your budget and needs.

Improving health and lifestyle – working on improving your health and lifestyle where possible e.g. losing weight can help to reduce premiums.

Smoking – smokers will often pay slightly more for cover, so it is worth considering quitting or cutting back to reduce the amount you will pay.

Pre-existing conditions – pre-existing medical conditions can affect the price of your premiums, speak to an insurance expert for more advice if worried about this.

For notable savings it is worth considering all of the above before submitting an application.

There are several types of income protection policy available, with great options for any budget. These policies are:

  • Short-term income protection insurance which is will usually pay out for up to 12 or 24 months from the point of claim. This option can be cheaper than some other income protection policies and beneficial for long term but not permanent breaks from work.
  • Long-term income protection insurance will continue to pay out right up until the end of the policy term, often longer than 24 months. This helps anyone who will be off work for very extended periods of time due to illness or injury. This cover is very comprehensive and so will be is the most expensive in terms of monthly premiums.
  • Guaranteed sick pay is generally cheaper than a full income protection policy as it excludes pre-existing conditions as reasons to claim. This policy type will in most cases pay out for up to 6 months from the point of claim. 
  • Personal accident insurance is usually the most cost effective form of income protection. A main selling point of this policy is that it will pay out for hospitalisation over 24 hours, injuries and accidental death

Does being a freelance worker affect income protection insurance?

NO – you shouldn’t expect to pay more or be declined cover just because you work on a freelance basis. Income protection insurance will provide someone who is self-employed (such a freelance worker or sole trader) with additional support if unable to work, without having to rely on loans or savings.

The insurer will ask you the same questions that they would with any other form of employment, including questions about your general health and lifestyle.

These questions are not a cause for concern. Insurers just want to have a full picture of your health before deciding whether to approve your application. This is because they will want to determine how likely you are to claim on your policy.

Why do I need income protection insurance for freelance work?

As a freelance worker, your income may be unpredictable month on month depending on job availability and other factors. If you also cannot work as normal due to illness or injury, your stream of income will be massively affected.

With income protection cover, you should receive a direct tax-free payment every month. This will normally cover around 50%-70% of your usual pre-tax income.

There are numerous illnesses and injuries you will be able to claim for, and most policies will continue to pay out every month for up to 12 or 24 months from the initial claim.

This means that anyone without a steady employment contract could definitely benefit from this type of policy.

Sometimes you may be concerned a lifestyle factor or medical condition will affect your eligibility for insurance cover. If this is the case, you may want to consider what is known as a ‘guaranteed’ policy.

Put simply this means that you are guaranteed to be approved for cover regardless of factors such as medical history, dangerous hobbies or occupations etc.

How do I claim on income protection insurance for freelancers

It is a simple process to submit an income protection claim. This 4-step process is:

  • Contact your insurance provider
  • Complete a claim form (usually online)
  • Submit medical evidence (if needed)
  • Submit financial evidence (if needed)

Common questions about income protection for freelancers

Below we have some commonly asked questions about income protection for freelance workers:

Is it worth taking out income protection insurance if I am a freelance worker?

IIncome protection insurance is a great idea for freelance workers, who may not be able to access additional support in the same way as those employed through another party. It is a very worthwhile policy to consider for protecting your finances if unable to work for an extended time period due to illness or injury.

What is not covered by self-employed (freelance) income protection?

This will be dependent on the individual policy/provider and the health and lifestyle of the applicant. Providers may place exclusions (things you cannot claim for) on policies for various reasons. It is worth checking the terms of individual policies before choosing one.

What conditions are covered by income protection?

Income protection will cover a variety of common illnesses and injuries if they cause you to be unable to work for a long period of time. If you are signed off work for 4 or more weeks, you should be eligible to claim.

How long will income protection pay out for?

This will depend on the type of income protection policy you have chosen. Short term income protection will usually pay out for 12 or 24 months at most, whereas long term cover can pay out for years (up until retirement). You will be able to receive payments until you return to work or your claim period ends.

*according to Statista.com

Useful resources for freelancers

Self employed income protection

Gov.uk – Working for yourself

Gov.uk – Get your SA302 tax calculation

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