Are you thinking of becoming self-employed or setting up your own limited company?
Congratulations on taking this brave step! As you prepare to embark on this new journey, you’ve probably already thought about supplies, your laptop, which social media platforms you might need, any equipment you require and how you might market your new business.
But have you given any thought to Life & Health insurance? As an employee, you likely had a benefits package that provided sick pay, holiday pay, Private Medical cover and other perks such as Death in Service cover.
Now that you’re no longer employed, it’s crucial that you find ways to protect yourself financially in case of an emergency. Here’s what you need to know about insurance when going self-employed.
1. Income Protection Insurance
Income protection insurance is designed to provide financial support if something happens that prevents you from being able to work. With income protection, you will receive a regular income if illness, accident or injury stops you from working.
It can also facilitate your return to work by providing rehabilitation costs should they be needed. Crucially, income protection is there for the long haul—it pays out until retirement age or until the policyholder is able to get back into the workforce (dependent on the cover selected; contact us for a quote here).
Some people confuse this with Critical Illness Insurance (read more on that below) which is completely different. Income Protection Insurance kicks in for a much wider range of illnesses – not just the big and scary-sounding ones – and injuries too.
In fact, Aviva’s 2021 Income Protection claims were largely (37%) paid out for Musculoskeletal issues, with only 11% paid out for cancer and 2.2% for heart conditions and stroke. In the same year, 5.9% of all new Income Protection claims were for COVID-19, which is very much something none of us expected.
What does this tell us? Even a minor illness can impact our finances; read on to find out just how much.
2. Private Medical Insurance
When illness strikes, it can be essential for self-employed workers and small company directors who don’t receive employer sick pay to have quick access to medical treatment so they can get back on their feet as quickly as possible.
Private medical insurance allows policyholders speedier access to diagnosis and treatment than they would likely receive through the NHS (see our recent post on P[1] rivate Medical Insurance for more info).
This means that not only are recovery times faster but also less time off work due to illness—which is especially important for those who are self-employed because when you stop working so does your income,
Legal and General’s eye-opening Deadline to Breadline 2022 report showed us just how important it is to get back to work quickly; 42% of employed adults in the UK believe they could survive for less than a month on their savings, with only 14% believing they could last for over a year on their savings.
3. Critical Illness Insurance
Last but not least, critical illness cover provides a lump sum payment should the policyholder become seriously ill during the term of their coverage period—conditions covered typically include cancer and heart attacks amongst others.
Conditions covered vary amongst providers, and we’ll happily compare cover and premiums for peace of mind. Critical illness cover gives people peace of mind knowing that in case of serious illness, financial worries won’t add further stress and strain at such an already difficult time in their lives.
Becoming self-employed carries its own risks—risks which those who are employed tend not take into consideration because they have access to employer benefits packages including sick pay and holiday pay amongst other perks. Many employees take these for granted until they find themselves without them after making the switch from employee status into self-employment status.
To protect yourself against unexpected events such as loss of income due to ill health or injury or long hospital waiting lists, consider investing in some form of insurance cover; whether it’s income protection insurance, private medical insurance or critical illness cover, taking out one or more forms of coverage will give you peace of mind, knowing that whatever life throws at you financially speaking, you’ll be ready for it!
What’s more, taking out cover via your new limited company is extremely tax-efficient too! Get in touch with us today to find out more and get a quotation – your future-self will thank you for it!
Link to blog post 1