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Income protection insurance for contractors

There are numerous benefits to being a contractor. Working on a contract basis can offer more flexibility than other occupations, which can leave this a very appealing career option.

There are currently 1.9 million contract workers in the UK. With contractors often being self employed, any disruption to being able to work can have a massive impact on your life.

If you suddenly become ill or injured and require an extended recovery period, this could lead to significant financial difficulty.

An income protection policy will provide you with a monthly tax-free lump sum, supporting you in paying for any financial commitments whilst unable to work.

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Income protection cover will be able to cover contractors. In fact, having this type of cover in place is a great idea for contractors. Like traditional life insurance, income protection cover is an excellent way to safeguard your finances.

As a contractor, you will often not be able to access traditional sick pay if unable to work due to long term illness or injury. This can lead to major concern as to how you will be able to pay your bills during this time.

Income protection cover will provide you with monthly financial support until either your claim period (usually 12 or 24 months) ends or you are well enough to return to work.  This additional income can be a relief for many, particularly if you do not have savings or other funds to rely on.

Does income protection insurance pay out for contractors?

YES – you should receive a pay out on contractor’s income protection, if unable to work for an extended time period due to illness or injury.

There are several common reasons that contractors may need to claim on their policy. These include:

Any of the above conditions would qualify for an income protection pay out, plus many other reasons as well. Which conditions/injuries are covered will vary depending on individual insurance providers.

Compare income protection insurance for contractors

Speak to one of our income protection experts for advice on which lenders will provide you with the best income protection for your needs. Lenders will be able to provide varying levels and terms of cover and each lender will vary in their pricing.

This is why comparison across lenders will usually be the best course of action for finding the right policy.

Our specialist advisors will be able to take all the information you provide about your occupation and general health and use this to find your perfect lender and policy.

YES – there are some great options out there for contractor’s income protection.

With working on a contract basis being a popular choice in the UK, insurers will be very familiar with providing cover in this situation.

How much is income protection insurance for contractors?

The pricing for income protection cover will vary from provider to provider. Comparing terms and policies across multiple insurance companies will often reveal several with extremely reasonable rates for the cover you require.

With income protection having the potential to provide vital support when you have no other sources of income, a small payment per month is well worth it.

Cheaper income protection insurance for contractors

There are several factors worth considering if wanting to lower the price of your income protection policy. These include:

Age – premiums have the potential to be much higher the older you are, so it is best to take out cover as early in life as possible

Comparison – compare the policies offered by multiple providers to find the most competitive pricing

Get the right advice – speaking to an income protection expert will help you to find ways to cut costs while still putting excellent cover in place

Smoking – if you smoke you may face higher costs for your policy, so it is worth quitting or cutting back before applying

Health and lifestyle factors – lifestyle choices such as exercising more or losing weight could cause the price of your policy to decrease

Pre-existing conditionshaving a pre-existing medical condition can affect your policy’s pricing so speak to a specialist for further advice

If you have savings you can rely on for a time, you may be able to find a cheaper policy by extending your deferred period.

A deferment period is the amount of time between your sick leave starting and income protection payments beginning. The longer this period is, the cheaper your premiums will usually be.

What a contractor may find the ‘best’ income protection policy will depend on the type and length of cover needed. There are several types of income protection so there are some great options for varying levels of cover. These are:

  • Short-term income protection insurance: will pay out for 12 or 24 months from the point of claim. Will cost less than a long-term policy and is useful for long term sickness that isn’t permanent.
  • Long-term income protection insurance: designed to pay out over a very long absence period meaning you can claim for a larger amount of time. The cover is very comprehensive so will be the most expensive policy type.
  • Guaranteed sick pay: usually cheaper than a full income protection policy. Excludes pre-existing conditions and will pay out for up to 6 months.
  • Personal accident insurance: the cheapest form of income protection. The key benefit is that it will pay out for injuries, accidental death and hospitalisation over 24 hours.

While contract working can be great for flexibility, it can mean income can be unpredictable. As contract workers also cannot access schemes such as statutory sick pay (SSP), this can lead to worries about being unable to afford bills if unable to work due to illness or injury.

In some cases, you may qualify the government’s employment and support allowance but this will only provide limited funds for a set period of time.

It can be extremely beneficial for contractors to put income protection insurance in place. Without income protection, you may be forced to rely upon savings or loans to replace your monthly income.

Guaranteed income protection insurance for contractors

Some providers may be able to provide you with what is known as ‘guaranteed’ cover. Guaranteed cover means there will be no need for medical underwriting.

This can be an attractive option if you are worried your medical history or other risk factors will affect your likelihood to be declined.

It is important to remember though that this type of cover will exclude claims for any pre-existing medical conditions.

It is very simple to put in an income protection claim. There are 4 steps to the claims process which are:

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

Common questions about contractor’s income protection

Below we have some common questions about income protection for contractors:

What is income protection?

Income protection is designed to pay out a monthly tax-free payment to cover 50%-70% of your pre-tax income. You can claim this if off sick for an extended time period.

How does income protection work for contractors?

It will work in the same way as for any other profession. Simply put a claim in, wait for approval and start receiving payments. These will continue until the end of the claim period or when you are able to return to work again.

Is income protection insurance worth it for contractors?

Income protection can be extremely useful for contractors. If unable to work for a long time, income protection provides crucial support for paying bills until able to return to working as normal.

Can I get income protection for self-employed contractors?

Contractors will work on a self employed basis in most cases. Self employed people will be able to get income protection and may need it more than most as if they cannot work, they may not receive any income at all.

Find out more information about SELF EMPLOYED INCOME PROTECTION.

Useful resources

Gov.uk – Understanding off-payroll working (IR35)

Gov.uk – What you must do as a Construction Industry Scheme (CIS) contractor

Gov.uk – Employment and Support Allowance (ESA)

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