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Income Protection Insurance for Sole Traders

Working for yourself can be extremely rewarding but doesn’t come without its challenges. If you were to become ill and unable to work, would you have enough support in place to cover your important monthly bills?

Without access to support like Statutory Sick Pay (SSP), sole traders can be left in dire straits financially if they are ill or injured. This is exactly the situation income protection insurance is designed for.

Income protection is an affordable way to protect yourself against financial loss. You can claim on your policy if you can’t work for 4 or more weeks due to accident or sickness. This gives you a much-needed safety net to help look after you and your family while you recover.

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YES – Income protection is a great option for people who are self employed such as sole traders.

Income protection can be very cost effective and will support you financially if you cannot work due to illness or injury. This policy will provide you with a tax-free monthly income so you can still afford to pay for your important expenses. You can use this money to pay for things such as:

  • Mortgage or rent payments
  • Utility bills
  • Finance agreements e.g. car finance
  • Cost of living

Learn more about INCOME PROTECTION INSURANCE.

Does income protection pay out for sole traders?

YES – Sole traders can benefit massively from having income protection in place. If you are seriously ill or badly injured, this policy allows you to take the time you need to fully recover before returning to work.

A sole trader income protection policy will pay out every month until you either return to working as normal or your claim period expires. These payments will generally cover between 50%-70% of your usual pre-tax income.

Most policies will allow you to claim for around 12-24 months at most (short term income protection). For extra protection you could choose a longer-term policy, which can pay out for years at a time if needed (until policy end or retirement).

Some common reasons to claim include:

  • Cancer
  • Mental health
  • Musculoskeletal issues
  • Serious injury (accidental)

More about SHORT TERM INCOME PROTECTION.

Compare income protection insurance for sole traders

The best way to find the cover you need at the right price will be to compare what is available with each provider. Think about the level of cover you need and your budget before making any decisions.

Can I get income protection for sole traders?

YES – There is no need to worry that income protection is only for people with an employer, self-employed people can get it too. Sole traders can often get a great level of cover for very affordable prices.

There is a wide range of options available for income protection, so you can choose the policy that best suits you and your budget.

How much is income protection insurance for sole traders?

One great thing about income protection policies is that they can be very flexible, allowing you to tailor them to your own budget. You should have a think about how much you can afford to pay each month (£s) and how much support you need before you apply.

You should consider:

  • Your usual income (insurers will allow you to estimate an average figure)
  • The expenses you need to cover (e.g. mortgage, utilities)
  • Do you have any dependents who would struggle if you can’t work?

Factors that can affect the price of your policy include:

  • Age
  • Height
  • Weight
  • General health/lifestyle

There are a few ways to lower the cost of your income protection policy, and some important things to think about before you apply. This includes:

Age – we always recommend getting insurance cover as early in life as possible. In most cases the younger you are, the cheaper your policy will be.

Comparing providers – it is always a good idea to shop around, to see what each provider is offering. Comparing policies across providers can help you to choose the cover you need at the best price.

Get proper advice – an income protection expert will be able to help you work out which providers will work best for your budget and the level of cover you need.

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

Smoking – smokers can end up paying more for cover. Quitting or cutting back could help you cut costs significantly.

Best income protection insurance for sole traders

There are a few different options for income protection, and which one is the right choice can vary from person to person.  The most important thing is to make sure you are happy with the level of cover you have and the price.

The two main types of income protection are:

Short term income protection – pays out for anywhere between 6 months to 24 months at most. Useful for shorter periods of sickness absence that aren’t permanent.

Long term income protection – can pay out for many years at a time (up to retirement age). Helpful for serious illnesses or injuries that leave you unable to work for very extended periods of time.

Similar policies include:

  • Critical illness cover – works similarly to income protection but only pays out for specified medical conditions. Pays out one lump sum rather than monthly payments.
  • Personal accident insurance – a more cost effective form of income protection. Pays out for accidental injuries, usually covering events and injuries like fractures, hospitalisation and more.
  • Guaranteed sick pay – another low cost option to protect your income. Will pay out a set income to you for around 6 months, helpful for shorter term absences. Excludes pre-existing conditions as a reason to claim.

Sole traders can’t access support that many employed people can, such as Statutory Sick Pay or employee sick pay schemes.

You may be able to get Employment and Support Allowance (ESA) but this can take 13 or more weeks and payments will often be far less than your normal income.

Without significant savings, you could find yourself in serious financial trouble if you weren’t able to work for an extended period of time. Income protection can give you peace of mind that you will have additional support in place when you need it.

How do I claim on income protection for sole traders?

If you need to claim on your income protection policy, the process is usually quick and easy. You will need to:

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

Helpful guides

Here, we have some more useful guides related to income protection insurance:

If you think INCOME PROTECTION INSURANCE is right for you and you need FREE, FRIENDLY advice, you can contact our EXPERTS free on 0800 009 6559.

Useful resources

Safe Workers – Average sick days in the UK 2022 

Statista – Sickness absence rate in the UK 1995-2021 

Citizen’s Advice – Check if you can get sick pay 

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