The day rate stops when you do
Contracting in IT pays well while you are working. Developers, testers, architects and project specialists can earn far more on a day rate than in a salaried role. The deal is that nobody pays you for the days you are ill. A client will replace you quickly if you are out for weeks.
Most contractors who need to claim are dealing with a back problem, a wrist or shoulder condition, or anxiety and depression. Those can last long enough to burn through a company's reserves, so decide how long you could manage before you need a benefit.
Personal cover or company-paid cover
If you trade through your own limited company, you can buy cover personally or have the company buy executive income protection. Company-paid premiums may be treated as a business expense, and the benefit goes to the company, which then pays you through payroll. Your accountant can confirm how it fits your accounts.
For life insurance, relevant life cover works in a similar way: the company pays for a personal policy for you, and the payout goes to your family through a trust. Our contractor income protection guide covers umbrella arrangements and the wider set-up in more depth.
- Personal policy: you pay, the benefit comes to you
- Executive income protection: the company pays and receives the benefit
- Relevant life: company-paid life cover for one director
Earnings, gaps and the claim
Insurers decide your benefit from your earnings, and for contractors that can be tricky. Many look at salary and dividends, sometimes averaged over a few years. Keep your accounts tidy, because the evidence matters when you claim.
Gaps between contracts are normal in IT. Check how a policy treats someone who falls ill while between roles. Some insurers assess you on your usual occupation as long as the gap is short. Ask before you buy rather than finding out at claim time.
Picking a waiting period that fits your reserves
A company with three months of running costs in the bank can comfortably choose a longer deferred period. A newer contractor with little saved may need cover to start after four weeks. The shorter the wait, the higher the premium.
Add up your mortgage or rent, household bills and the company's fixed costs. That figure, and the cash you hold, point to the right deferred period more reliably than any rule of thumb.
How we help IT contractors
Insurers usually treat IT work as a low-risk occupation, so own occupation cover is widely available. We compare policies across our panel and look at the details that matter to contractors: how earnings are assessed, how gaps are handled and whether a company-paid option fits.
We work alongside your accountant rather than replacing them, and we help you answer the application questions clearly. If you ever need to claim, we can help with the paperwork too.