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What is the best income protection for self-employed?

We explain all the main points about income protection and how self-employed workers can benefit from these policies

A photo of Daniel Sharpe-Szunko, the author

By Daniel Sharpe-Szunko

Published on: 6 July 2023

4 min read

What is the best income protection for self-employed?

Income protection insurance works as a safety net, helping to replace any lost income if you are off work due to illness or injury. Self-employed workers are often at a higher risk if they need to take sick leave, as they won’t have access to traditional employee benefits like sick pay.

There are a few different types of income protection and a range of providers offering these policies in the UK. Doing some research before choosing your policy can be key to finding the right level of protection at a suitable price.

Can self-employed get income protection?

Self-employed workers can get income protection as easily as employed workers in many cases. You simply choose the policy you like the look of and the insurer that suits you best.

The main difference for self-employed people is that you will need provide more evidence of your income, so insurers can work out how much cover you need. This will be in the form of bank statements or accountant reference. Income protection will normally pay out a percentage of your average monthly wage (around 60%).

There are 4 main types of income protection which allows you to choose the cover that works best for you:

Key facts about these policies:

  • Best for price: Guaranteed sick pay and personal accident insurance will normally be cheaper – but the level of cover will be more limited
  • Best for comprehensive cover: Long term income protection will pay out for a longer time period, useful if you were to become very seriously ill
  • Best for flexibility: All the policies above will usually have some flexibility in the amount of cover you can have, guaranteed sick pay tends to have the most restrictions attached
  • Best for availability: Most insurers will sell short term income protection – which gives you a wider range of providers and policies to choose from.

More information:

Best insurers for self-employed income protection

Income protection insurance is a widely available product, and most UK insurers will sell some form of income protection policy. There isn’t one ‘best’ insurer as each one has slightly different policies and one insurer might suit some people better than others.

UK self-employed income protection insurance providers:

Income protection can be very useful for self-employed people to have. Self-employed workers won’t have access to benefits like workplace sick pay or Statutory Sick Pay. Without this extra support, you could struggle financially if unable to work due to illness or injury.

When considering buying income protection think about:

  • Do you have sufficient savings to support you if needed?
  • How much do pay in outgoing expenses each month?
  • Do you have rent or mortgage payments that would need paying while off sick?

Other useful self-employed insurance policies

There are a range of other policies that can be beneficial for people who are self-employed.

Life insurance for self-employed workers

Life insurance is probably the most well-known type of insurance and provides your family or other beneficiaries will additional financial support. These policies pay out a cash lump sum in the event of your death which can be used to pay for expenses such as funeral costs or mortgage repayments.

A good thing about life insurance is there is usually a wide variety of different policies to choose from. You can choose the policy and level of cover that best suits your own needs and how much you can afford to pay.

Common types of life insurance include:

Self-employed business owners or company directors may want to consider business life insurance policies, keyperson insurance in particular. A keyperson or ‘keyman’ policy protects a business in the event someone key to the running of it was to pass away.

Critical illness cover for self-employed workers

Another policy that can be useful is critical illness cover. Critical illness cover and income protection often get confused as they have some similarities in how they work and what they are used for.

They are completely different policies though, the main similarity being that both pay out if you become seriously ill.

Critical illness cover:

  • Pays out on diagnosis of a serious medical condition (must be a condition covered in your policy terms and conditions)
  • Pays out a cash lump sum (income protection provides monthly payments to replace income)
  • Will cover a set number of medical conditions and each insurer will have different specifications

There are pros and cons to critical illness cover and income protection insurance. If you aren’t sure which is right for you, you can speak to an insurance specialist for further advice.

More information – Critical illness cover vs income protection

Resources

Turn2Us – Self employment and benefits 

Citizen’s Advice – Check if you can claim ESA

Statista – UK Self Employment Figures 2023

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