Income protection for sole traders

There isn’t a specific type of income protection designed for sole traders, ‘sole traders income protection’ simply refers to an income protection policy taken out by a sole trader.

Income protection is a type of policy that covers up to 70% of your monthly income if you’re unable to work due to an illness or injury.

For sole traders, whose income typically depends on their ability to actively work and run their business, this form of cover can be crucial.

Unlike employees who might have access to sick leave or workers benefits/compensation, sole traders bear the full financial risk if they can’t work.

Through the Reassured advised team, you can compare whole of market income protection quotes, to make sure you secure our best deal.

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Quick summary

  • A sole trader is a self-employed person who runs their own business as an individual
  • Income protection can be a safety net if you’re ever unable to work from an illness or injury
  • Sole traders will benefit from income protection because they don’t have the typical benefits most employed individuals have, for example sick leave
  • The private sector in the UK included 3.1 million sole proprietorships, making up 56% of the overall business population[1]
  • Only 6% of sole traders and self-employed workers have income protection, leaving a large amount without financial backup[2]

Can you get income protection as a sole trader?

Yes, you could secure an income protection policy if you’re a sole trader.

Income protection options for sole traders can be found with most insurers, although the coverage, waiting periods, and pay out amounts can differ based on each insurer's terms and conditions.

This highlights the need to compare multiple quotes to ensure you select the best option for your needs.

Depending on your occupation, some providers may be more accepting of your circumstances, while others might have exclusions that could leave you vulnerable in certain situations.

As a sole trader your income can depend entirely on your ability to run your business, therefore it’s essential to review what each policy includes to ensure that it aligns with your personal and professional risks.

What is sole trader income protection?

As mentioned above, there isn’t a specific policy designed for sole traders, ‘sole trader income protection’ simply refers to an income protection policy taken out by a sole trader.

Sole traders are usually a business where there is only one owner, but they may have employees who work for them. These careers often include:

  • Photographers
  • Electricians
  • Hairdressers
  • Graphic designers
  • Social media influencers/bloggers
  • Small online clothing brand owners
  • Beauty therapists

Income protection offers a safety net by providing you with monthly payments that could replace up to 70% of your income (depending on the insurer) if you can’t work due to an illness or injury.

Sole traders are self-employed and therefore won’t have access to typical employee benefits, like sick pay, resulting in a loss of income. Having income protection can help to manage essential living expenses when your usual income is unavailable.

Find Sole Traders Income Protection Quotes »

How does income protection work for sole traders?

As a sole trader, you are generally considered self-employed, which means you should look into getting self-employed income protection. To qualify, you need to be self-employed, whether that’s as a sole trader, a director of a limited company, or part of a partnership.

Income protection is a form of financial protection that can help you manage essential expenses. Without the safety net of sick pay from an employer this can be essential to have as back up should the unexpected happen.

As a sole trader, when applying for a policy, insurers may look into your past income records (e.g. tax returns of business statements) to determine your average income if it’s not steady.

Why do I need income protection as a sole trader?

Without access to support like Statutory Sick Pay (SSP), becoming ill or having an accident may result in having no source on income.

Having an income protection policy can help in covering essential expenses that your regular income would typically cover and, in some instances, it can also help with any medical bills associated with your illness or injury.

Protecting your income can enable you to maintain your lifestyle and keep your business afloat until you are ready to return to work.

You may be eligible to receive Employment and Support Allowance (ESA), which is up to £71.70 per week (if you’re under 25) or up to £90.50 per week (for 25 and over)[3] however, this may not be sufficient enough to cover all costs.

An income protection policy can typically help to cover:

  • Mortgage / rent payments
  • Household bills
  • Childcare
  • Living costs
  • Loan payments / debts
  • Food shop
  • Essentials (such as your food shop)
  • Medical bills

We have written a what does income protection cover article to provide more detailed information.

How much income protection insurance do you need?

Enter the fields which apply to you to calculate the level of income protection cover you might require to help cover key costs.

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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

£ 0

Let us find you our best quotes.

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Will being a sole trader affect my income protection?

Yes, depending on what type of occupation you have it could affect your premium costs.

For example, someone who works in construction may pay more for cover and have different policy terms compared to a hair dresser or graphic designer due to the level of risk.

As a sole trader, your income may differ to employees because your income can be less predictable, especially If you are just starting up.

Income protection was designed to replace a portion of your income if you’re unable to work, however if your income isn’t guaranteed in the same way as a salary, insurers may evaluate this level of risk differently.

You may be asked to provide additional financial information when applying so they can estimate your average earnings.

The best income protection for sole traders

There isn’t necessarily a ‘best’ income protection option for a sole trader. The best policy for you will be down to your personal needs.

There are two types of income protection:

Short-term income protection insurance - Usually has a maximum payment period of 1-5 years, although this can vary between insurers.

Long-term income protection insurance - Can potentially pay out to you until you retire if you’re unable to return to work, providing security for the whole of your career.

The best choice for you can be down to budget, your personal circumstances and what you need to cover. Both options could cover up to 70% of your monthly income.

Why not reach out to one of our friendly professionals to explore your options and decide what’s right for you?

How much is income protection for sole traders?

The price you’ll pay for your income protection as a sole trader will be based on your personal circumstances, including the level of risk that comes with your job.

Your level of risk will be based on a variety of factors including:

Your premiums may also be based of your desired policy details:

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

Insurance companies have varying terms and conditions, which means you may experience different costs (inflated premiums) depending on your personal circumstances.

They also assess the level of risk associated with your occupation; for instance, a builder who regularly operates heavy machinery may face higher costs compared to a blogger who works in a more stable office environment.

Below are examples of income protection quotes from our 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

Please note that the quotes provided above are to give you an idea of potential income protection costs. Keep in mind that individual circumstances vary, and the cost can differ based on the nature of different jobs and their associated risk levels

Compare income protection quotes for sole traders

As a sole trader, having an income protection policy isn’t just a good decision; it’s a crucial safeguard for your financial wellbeing.

Unlike employees who may have access to sick leave or other benefits through their employers, sole traders bear the full responsibility for their income.

Getting income protection is important for your business as a sole trader because it provides peace of mind and financial security.

The advised team at Reassured offers a comprehensive market comparison service that can help you secure the best deal.

By comparing various policies from different providers, we can help you identify the right policy for your personal needs and circumstances to make an informed decision.

Compare Quotes for Sole Traders »

Sources:

[1] https://www.gov.uk/government/statistics/business-population-estimates-2023/business-population-estimates-for-the-uk-and-regions-2023-statistical-release

[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

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