Self-Employed Critical Illness – a guide

Something many of us take for granted is our health, often thinking we are invincible against illness or injury. However, when you’re Self-Employed, you are reliant on yourself to work and earn a living.

If you’re diagnosed with cancer, have a heart attack or lose a limb due to an illness or accident, you may be incapacitated for a significant period of time. One important question to ask yourself is: “Will I be able to take care of myself and my family financially if it is impossible for me to work?

What is Critical Illness for the Self-Employed?

Critical illness insurance will pay out a tax-free lump sum if you contract a serious illness or sustain a life-changing injury. If you’re Self-Employed, it’s a lifeline that will fund your ongoing financial commitments if you can’t work.

It also gives you peace of mind should the worst happen. Critical Illness cover is affordable for most people and premiums depend on your age and health when you take out a policy.

Why is Critical Illness important if you are Self-Employed?

Self-Employed people don’t receive employed sickness benefits as employed people do. So a serious illness or injury will affect your ability to earn money.

If you work in the trades industry, you need to leave home every day to carry out a job in someone else’s home or business. If you are hospitalised or need to undergo months of recovery, you will not be able to work.

Likewise, if you’re home-based doing work that requires mental concentration, hospitalisation and intense treatment may make it impossible to work. Without the backup of financial protection, your income will grind to a halt.

If you are the main breadwinner you will be unable to pay your monthly outgoings such as rent or mortgage payments. This means your home could be at risk of repossession and debt could mount up.

However, for a small monthly premium, similar to the cost of a TV licence, you could easily protect yourself and your family. The sooner you take out critical illness cover, the more affordable it will be.

What is the difference between protection policies?

There are different types of insurance for Self-Employed people under the banner Personal Insurance. They offer varying levels of protection so before you take out a policy it’s important to know the difference between them.

Personal Insurance

This is for you if you have dependents that would suffer financially if you are not able to work and provide for them. Personal Insurance protects your monthly income, your health, your life and supplements NHS medical treatment.

Income protection cover

This long term Self-Employed income protection insurance pays a portion of your income regularly if you are unable to work due to illness or injury. Payments continue until you return to work or the policy ends.

Short term income protection will pay you a monthly amount between 12 months and two years. There may be a delay of a few weeks before your claim pays out.

Critical Illness Cover

This pays out a one-off tax-free lump sum if you are diagnosed with an illness or injury covered by the policy. The money can be used to cover ongoing household expenses, pay off your mortgage, or adapt your home.

Once the lump sum has been paid the policy ends. Monthly premiums depend on your age, medical history, the work you do, plus hobbies and lifestyle. The riskier your work, lifestyle and hobbies, the higher the premium and you must mention pre-existing conditions.

Life Insurance

Protecting your loved ones if you die is essential financial planning if you’re Self-Employed and goes hand in hand with critical illness cover. Depending on the policy it can pay out a single tax-free lump sum or regular payments to sustain your family for a number of years after your death.

Private Medical Insurance

The NHS provides an excellent service which is paid for via our NI contributions and is free at the point of treatment. However, if you need an operation quickly so you can get back to work faster, it pays for private treatment which takes less time to access.

How do I know which insurance is right for me?

The best way to find the best fit for you and your circumstances is to discuss your individual needs with an independent financial adviser like Protection Matters. They will help you choose the right provider and policy.

How can Protection Matters help me?

We can help you choose the right type of protection for you and your family. Because we’re independent life insurance brokers, we’re not affiliated with any specific provider.

That means our advice is always impartial, so we focus just on you and your needs to find the right insurer and personal protection policy.

We’ll guide you through the application, submit it on your behalf and talk you through the terms and conditions. This will save you time and money and give you the most important thing of all – peace of mind.