Self-employed income protection [Quick summary]

  • You could receive monthly, tax-free, payments to replace your income while you’re unable to work due to illness or injury
  • Self-employed income protection refers to a standard income protection policy taken out by someone who’s self-employed
  • As of July 2024, there were around 4.24 million self-employed workers in the UK[1]
  • If you’re a self-employed director of a limited company, you also have the option of an executive income protection policy
  • Only 6% of self-employed workers have an income protection product in place, compared to 16% of those in employment[2]
  • Explore your protection options as a self-employed worker through Reassured

Can you get income protection you are self-employed?

Yes, you can take out an income protection policy if you’re self-employed.

In fact, income protection can be particularly beneficial for those who are self-employed and don’t receive traditional sick pay benefits.

The tax-free monthly payments you receive can help to keep you afloat financially while you’re unable to work due to illness or injury.

Reassured can help you find the right self-employed income protection policy to meet your needs, at the best available price.

Through our advised team you can compare quotes from the whole of the market and receive personalised recommendations for your circumstances. Get in touch today for your fee-free quotes.

This helpful self-employed income protection guide will be covering topics such as:

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Why is income protection important for the self-employed?

Here are 5 reasons income protection can be important for the self-employed:

  1. No sick pay - As a self-employed worker, you won’t benefit from sick pay to help you financially while you’re off work. An income protection policy can act as a form of sick pay by proving you with a percentage of your income until you can return to work.
  2. Limited government support - While you may have access to ESA (Employment Support Allowance), the amount you receive is unlikely to provide enough financial aid for you and your loved ones (up to £71.70 per week for those under 25 and up to £90.50 per week if you’re aged 25 and over[3]).
  3. Make a full recovery - 17% of self-employed workers would carry on working despite illness or injury[2]. With income protection, you have peace of mind that you can take the time off that you need.
  4. Long term cover - Cover can be taken out on a long term basis to provide protection for the rest of your working life if your illness/injury means you’re unable to return to work.
  5. Protect your lifestyle - 19% of UK workers said they would struggle to pay their mortgage or rent if they were unable to work for 2 months due to illness or injury[2]. Your monthly payments could be used to cover rent/mortgage costs, as well as other daily living costs.

If you’re not sure if income protection is right for you, our advised team can talk you through everything you need to know and provide recommendations on what might be best for your circumstances.

Get in touch today to compare quotes from the whole of the market.

How much income protection do self-employed workers need?

Work out how much income protection insurance you may need based on your current financial commitments. Simply fill in the fields which apply to you for an instant calculation.

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£723 a month is the average monthly mortgage payment in the UK, with the average monthly rental price coming in at £700.

The majority of our monthly income will go towards rental or mortgage payments.

For this reason, it’s essential to have precautions in place to ensure you could keep up to date with your payments if you weren’t receiving your usual income.

Monthly income protection payments can help to cover this large expense and ensure you can stay in your home.
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According to the Money Advice Service, the average household spends £340 a month on household bills.

This includes electricity, gas, TV and broadband.
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Childcare costs are on the rise with it now costing £137.69 per week for part-time nursery for a child under the age of two.

That’s over £550 per month - is this an amount you’d be able to keep up with if you were unable to work?

Becoming ill could also result in the need for additional childcare while you attend doctors’ appointments or medical treatment.
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The average household in the UK spends around £97 a week on their food shop, totaling £388 a month.

While this may seem like a small amount in comparison to some of the other expenses mentioned, the food shop is often where we try to scrimp and save when we fall on hard times.

Income protection can take care of the cost of your weekly food shop, as well as many other essential costs.
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At the beginning of 2020, credit card debt in the UK was at £2.1 billion, with almost 27 million UK residents in some kind of debt.

Becoming unable to work could make it hard to keep up with credit card or loan payments (including car finance or other financed goods).

Failure to keep up with payments could result in additional interest being incurred or late fees issues - resulting in a higher total needing to be paid.
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The average spent on public transport each month comes to an average of £94.

This includes the cost of public transport, as well as petrol and diesel vehicles.

While this amount may reduce while you’re unable to work as you won’t need to commute there may be additional spending on public transportation if your illness or injury leaves you unable to drive.
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Your total cover estimate

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Let us find your best quotes.

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How does self-employed income protection work?

Income protection for self-employed works the same as any other income protection policy.

  1. You’ll apply for a policy by providing details about yourself and your cover requirements. Your eligibility and the price you pay will then be assessed.
  2. Once a policy is in place, you’ll pay a monthly premium.
  3. If you develop an illness or sustain an injury which prevents you from working (as per the terms and conditions of your policy), you can make a claim.
  4. If you’re still unable to work once your deferred period has come to an end, your payments will commence.
  5. Your policy will then pay out to you until you return to work, your payment period comes to an end or until your policy term comes to an end (whichever happens first).

Does being self-employed affect income protection?

Being self-employed could affect your income protection application if your specific occupation involves a degree of risk.

For example, if your job requires you to use heavy/dangerous machinery, work from height or travel to unsafe areas, you could be seen as high-risk.

During the application, you’ll be asked questions about your occupation to allow insurers to get a better understanding of your personal circumstances.

Being self-employed could also affect what information you need to provide to insurers. As self-employed earnings can fluctuate, you could be asked to provide evidence of earnings from the last 3 years and an average will be taken from this.

You may also be asked to provide information in the form of a personal tax calculation or self-assessment tax return from HMRC.

What is the best income protection for self-employed?

The best income protection for self-employed will depend on your individual requirements.

The terms of an income protection policy can often be tailored to meet your specific needs, giving you choice over how your policy will work.

Policy terms and conditionsDefinition
Benefit amountThis is how much will be paid out to you. As this is monthly, it’s sometimes referred to as your ‘monthly benefit’. The amount that’s paid out to you will be a percentage of your gross income (typically between 50% - 70%).
Policy termYour policy term refers to how long you’ll be covered for. You can choose a term length to meet your needs but, often, cover must need to cease by the time you turn 70.
Definition of incapacityWhat makes you eligible to make a claim. Most policies come with an ‘own occupation’ definition, allowing you to claim when you’re unable to do your own job. However, it could be possible for your policy to have a ‘suited tasks’ or ‘any occupation’ definition.
Deferred periodThe period that must pass in order for your payments to start. Common options include 4, 8, 13, 26 and 52 weeks. For example, if you had a deferred period of 4 weeks, you must still be unable to work after 4 weeks in order for your payments to start.
Payment periodHow long you’ll receive payments for. Your policy could pay out on a short term (a maximum of 1, 2 or 5 years) or long term (until your policy comes to an end) basis. A short term policy could allow you to make multiple claims throughout the policy term, whereas a long term policy could pay out to you for the rest of your working life if you’re unable to return to work.
Premium typeHow you’ll pay for your cover. Premiums can be guaranteed (stay the same), reviewable (subject to change at the discretion of the insurer) or age-based (change each year as you get older).

To find the best income protection for your needs, it’s important to compare multiple quotes.

Our advised team can talk through your needs and provide you with the most suitable options.

Quotes are free of charge and without any obligation.

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What is personal income protection for self-employed?

A personal income protection policy can be secured by a self-employed individual to protect their own income.

You’ll be covered if you become too ill or injured to work and a percentage of your gross income will be paid out on a monthly basis.

Your monthly payments can help you to cover living expenses (such as mortgage/rent payments and household bills) until you’re well enough to return to work.

Personal income protection key points:

  • Up to 70% of your gross earnings could be protected
  • Cover if you become ill or injured
  • Can be taken out on a short or long term basis
  • Monthly payments are tax free
  • Available through the advised team at Reassured from 20p-a-day ‡

What is executive income protection for self-employed?

Executive income protection can be taken out by self-employed directors of their own limited company.

Through an executive income protection policy you could choose to cover any employee.

This could allow you to cover your own income, or it could allow you to provide financial protection to an employee within your business.

As executive income protection is taken out and paid for by the business, the premiums could be classed as a business expense making them tax deductible for the business owner.

Executive income protection key points:

  • Up to 80% of the insured employee’s earnings could be protected
  • Cover if you become ill or injured
  • Monthly premiums could be claimed as a business expense
  • Monthly payments (for the insured employee) could be subject to income tax and national insurance
  • Available through the advised team at Reassured

How much is income protection for self-employed?

The cost of income protection for self-employed will depend on your personal circumstances and policy details. Including:

Personal details:

  • Age
  • Occupation
  • Smoking status
  • Health & wellbeing
  • Lifestyle (hobbies, alcohol consumption and drug use)

Policy details:

  • Benefit amount
  • Policy term
  • Payment period
  • Deferred period
  • Definition of incapacity
  • Premium type

Insurers will use this information assess the level of risk you pose and your monthly premium will be calculated accordingly.

Depending on your job role, you could experience inflated premiums due to the increased risk of an illness or accident occurring.

For example, a self-employed construction worker who works on site is likely to pay more than a self-employed freelance writer who works from home or from an office space.

Below are some example quotes from our income protection comparison service.

Quotes are based on a non-smoker, in good health, with a low risk occupation and annual income of £30,000. The policy term is until age 65, with a 3 month deferred period and a 1 year payment period:

Age National Friendly
Vitality LV=
Legal & General
20£7.50£8.65£8.76£8.96
25£7.50£10.02£10.27£10.40
30£7.50£11.51£12.16£11.11
35£7.86£13.88£14.37£13.39
40£8.78£17.95£17.22£17.00
45£9.97£22.86£21.18£21.55
50£11.52£33.11£27.18£32.07

While the quotes above can help to give an idea of pricing, the exact cost you pay can vary based on the factors mentioned above.

Comparing quotes is essential in securing the most affordable cover for your personal circumstances.

Our advised team can save you time and money by comparing multiple quotes at once and finding you the best price policies for your circumstances.

Compare self-employed income protection insurance

Income protection can be vital for self-employed workers to help provide financial support during periods of ill health.

By securing a policy you can have peace of mind that you can take the time off that you need to recover, while keeping up to date with your monthly financial commitments.

Through the advised team at Reassured, it’s possible to secure both personal and executive income protection quotes.

All quotes are personalised, fee-free and without obligation. Get in touch today to explore your options.

Compare Self-Employed Income Protection Quotes »

Other common questions about self-employed income protection

What illnesses does income protection for self-employed cover?

Depending on your definition of incapacity, income protection could pay out for any illness/injury that keeps you off work for longer than your deferred period.

Unlike other forms of cover (such as critical illness cover), there isn’t a specified list of conditions.

In 2023 leading insurer Legal & General found their most common reason for paying claims were:

What is not covered by self-employed income protection?

The following won’t be covered by an income protection policy:

  • Your full income
  • Unemployment
  • Self-inflicted injuries
  • Injury/illness as a result of drug/alcohol abuse
  • Pre-existing conditions

How much does income protection for self-employed pay out?

A personal income protection policy could pay out up to 70% of your income, or an executive income protection policy could pay out up to 80% of the insured employee’s income.

Is income protection tax deductible for self-employed?

If you’re the director of your own limited company and take out an executive income protection policy, the premiums paid through your business could be tax deductible.

As the premiums are paid for by your business, they can be seen as a business expense.

As a sole trader without a limited company, you’ll need to secure a personal policy which won’t be eligible for corporation tax relief.

Sources:

[1] https://researchbriefings.files.parliament.uk/documents/CBP-9366/CBP-9366.pdf

[2] https://www.lvadviser.com/knowledge-centre/news-hub/17pc-of-self-employed-uk-workers-would-work-through-illness-or-injury

[3] https://www.gov.uk/employment-support-allowance/what-youll-get

[4] https://www.legalandgeneral.com/landg-assets/adviser/protection/protection-new/adviser-toolkit/our-claims/2023-claims-statistics-infographic.pdf

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