Many self employed individuals arrange income protection to cover themselves in case they are unable to work due to accident or sickness. This is a vital form of insurance if you are self-employed as you will not receive sick pay. However, make sure that you are not making one of these common mistakes:
1. Stating your net income incorrectly
As you are able to cover a certain percentage of your income, if you are sole trader make sure that you state your income after expenses but before personal tax (i.e. your net profit) to avoid over insuring yourself. If you are a company director remember that you can use your salary and dividends for the income figure.
At claims stage the insurer will usually ask for your accounts and self assessment tax form to check your earnings are sufficient for your chosen level of cover.
2. Not seeking advice
Whilst it is tempting to get a quote online it may mean that you miss out on executive plans for company directors that are not quoted online and which can be put through your business.
The best thing to do is to speak to one of our advisers who are self employed income protection experts and have a broad knowledge of the plans available on the market. They will be able to talk through your options and make recommendations.
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3. Getting less comprehensive cover
The least comprehensive policies use the “activities of daily living” definition of incapacity. Some insurers will only offer these policies to manual workers rather than the more comprehensive “Own Occupation” cover. Therefore many manual workers will take out one of these policies.
However there are insurers available who will offer Own Occupation cover to manual workers so it is important to speak to an adviser to get the best policy for your circumstances.
4. Paying for cover which you can’t use
Some self employed people take out, and pay for policies which include unemployment cover. These usually pay out if someone has been made involuntarily redundant.
As a self employed person it is harder to make a successful claim on an unemployment policy as they often state that the business must have closed down through no fault of your own, which is difficult to prove.
It is also often necessary for the business be declared insolvent / bankrupt and for you to be in receipt of Job Seekers Allowance. Given these restrictions on being able to claim, Drewberry Insurance does not usually recommend unemployment insurance for self employed individuals.
Need some guidance?
To find out more please visit our dedicated page on self-employed income protection insurance or call us on 0208 432 7333 to discuss your options with one of our expert insurance advisers.