No sick pay, no cover from a boss
When you work for yourself, the day you stop working is the day you stop earning. There is no employer sick pay and no statutory sick pay. State benefits may help, but they are means-tested or modest and unlikely to cover a mortgage and the bills.
A plumber with a bad back or a hairdresser with a broken wrist can lose months of income from an injury that is not life-threatening at all. Income protection is built for exactly that: the long, ordinary illnesses and injuries that keep you off the tools.
How insurers work out your income
For a sole trader or partner, insurers look at your share of the business profit, after expenses and before tax, usually averaged over recent tax years. Your accounts or SA302 calculations from HMRC are the evidence they ask for at claim time, and sometimes at application.
If your earnings jump around, tell us. Some insurers take an average over a few years, and others look at the best recent year. Choosing the right insurer for an uneven income can make a real difference to what you could claim.
- Keep your last few years of accounts or tax calculations to hand
- Recent growth may not be recognised until it shows in your accounts
- New businesses with little trading history still have options
- Cover cannot normally exceed a set share of your pre-tax income
Picking a waiting period you can live with
The deferred period is how long you wait between stopping work and the first payment. Short periods cost more, longer ones cost less. The right choice depends on how much cash you hold and how long your savings would carry you.
Ask yourself how many months you could pay the mortgage and the bills from savings or a business buffer. Set the waiting period to end around then. Some self-employed people pick a short wait on a smaller amount and a longer wait on the rest.
The definition of incapacity matters
Policies differ in what you need to be unable to do before they pay. The strongest wording pays if you cannot do your own occupation. Weaker wordings may only pay if you cannot do any suited work, or a list of everyday tasks. The wording sits in the policy terms, and we will point it out to you in plain words before you buy.
For a skilled trade, own-occupation cover is worth asking for. Some manual jobs can only get a weaker definition, and we will tell you plainly what the insurer has offered so you can weigh it up. A weaker definition still pays out in many situations, so it can be well worth having, provided you know what it covers.
How long the policy pays
Full-term income protection keeps paying until you go back to work, reach the end of the policy or die, whichever comes first. Budget policies limit each claim to a fixed period, commonly a year or two. After that, the payments stop even if you are still unwell.
Short-term cover costs less and suits people who mainly fear a few lost months, such as a broken leg on a building site. Full-term cover protects against the illness that keeps you out of work for years. Your savings, your partner's income and your age all feed into which one makes sense for you.
Think about the business as well as yourself. If you employ staff or pay rent on a unit, those overheads would carry on while you recover. Business expenses cover or key person cover can sit alongside your personal policy, and we can tell you whether either is worth a look.
How Hi Tomorrow helps the self-employed
We speak to a lot of people who run their own show and have never had sick pay in their lives. We ask what you do day to day, how your income has moved over the last few years and what money you hold back, then compare the income protection options on our panel.
We explain the definition, the waiting period and how long the policy pays in plain words. If you ever need to claim, we can help you gather your accounts and work with the insurer while you focus on getting better.