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Self-Employed Income Protection

Self-Employed Income Protection

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Last updated: 10 February 2022

There are many advantages that come with being self-employed. You have the flexibility to work during the hours that suit you best and let’s not forget about the tax breaks! But being your own boss means that you don’t qualify for the typical employee benefits that you would get if you worked for a company. This means that you are responsible for ensuring that protective measures are put in place so that you do not feel financial strain during unforeseen events where you cannot receive an income. This is where self-employed income protection insurance can be a saving grace.  

What is self-employed income protection insurance?

When you’re self-employed, then you will not have access to the insurance cover that’s generally provided by an employer. If something were to happen to you and you could no longer perform the duties that generated your income, then you could potentially suffer financially. No income could mean that you would not be able to pay your bills or cover the day-to-day expenses that you have become accustomed to. 

We, therefore, advise self-employed individuals to obtain income protection insurance (sometimes referred to as income replacement insurance). 

Self-employed income protection insurance is a policy that pays you if you cannot work anymore due to an unforeseen injury or illness. Depending on the terms of your policy, the payment you receive could cover your rent, mortgage payments, outstanding debts, and employees’ salaries until such time that you can once again work. 

How does self-employed income protection work?

Self-employed income protection cover will provide you with a long-term monthly income if you suddenly become ill or are in an accident and can no longer perform the role that was generating your income. The monthly income that will be paid will be determined before your policy is signed but most insurers will agree to a pay-out of between 50% and 80% of the income you were earning whilst you were healthy and working as normal. 

These monthly payments will be paid to you every month until such a time that you can work again. If you are not able to ever work again, then they will pay-out until the time that you reach retirement age.    

The Different Types of Cover

When purchasing a self-employed income protection policy, there are three types of cover that you need to consider before agreeing to a plan. You may want to include each type in your policy or you can select the terms that you feel will best suit your situation. 

The three types of self-employed insurance are:

Self-employed Sickness Insurance 

This cover offers protection in the event that you have a short-term illness, or something more serious and cannot work again.

Self-employed Injury Insurance 

This type of insurance will replace your income if you cannot work due to an injury.

Self-employed Sick Pay Insurance 

Self-employed sick pay insurance will provide cover if you are self-employed and do not qualify for statutory sick pay.

How much does self-employment cover cost?

The price of a self-employment policy will vary from person to person. The main deciding factors that will determine your monthly premium are:

  • Your age.
  • Your health status (do you have any pre-existing medical conditions)?
  • The type of work you do (does your role put you at risk)?
  • The income you would like to be paid out.
  • Whether you want long-term or short-term income protection.

What’s the difference between long-term and short-term income protection insurance for self-employed people?
Long-term income protection will give you cover in the unforeseen event that you fall ill or are injured. If your illness or injury prevents you from working, then you will receive pay-outs until you’re able to start working again or until you retire (whichever is soonest).
Short-term income protection is generally cheaper. This is because the pay-outs last for a shorter amount of time (usually between six months and two years). Once the payment period has elapsed, you will no longer receive payments even if you still cannot work. 

When shopping around for a self-employed income protection plan that will suit your lifestyle and your budget, then we urge you to compare income protection insurance quotes and terms from a few providers before making a final decision. 

How to Compare Unemployment Insurance

The quickest and easiest way to find affordable and accommodating self-employed income protection policy is to use our online insurance comparison tool. Simply fill in our form with just a few of your details and we will provide you with a range of quotes that have been sourced from reputable insurance providers found in the UK. Our format will allow you to easily compare prices and terms so that you can select a plan that will give you the cover you need at premiums you can afford. 

We are an independent and impartial price comparison website.


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Fergus Cole

Author: Fergus Cole

Fergus is a journalist specialising in the personal finance, energy and broadband sectors. He also has a passion for travel and adventure so tries to make the most of this in any spare time he gets.

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