Can You Get Income Protection If You’re Self-Employed?
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Can You Get Income Protection If You’re Self-Employed?

Toni Petto

Toni Petto

26/03/2021 • 9 minute read

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Confused about income protection?

When you’re a salaried employee, it’s easy to flirt with the idea of setting your own hours and answering to no one but yourself. After all, is it really ‘work’ when you’re pursuing a career that aligns with your passions and hobbies? Well, for some this lifestyle is a reality. That is of course, for self-employed workers.

Unfortunately, as most self-employed workers will tell you, it’s not always sunshine and rainbows. Being self-employed means carrying a lot more responsibility than a salaried employee working for the ‘man.’ One of the biggest things many new freelancers or business owners ask themselves is, ‘can you get income protection if you’re self-employed? The short answer is yes. However, with all insurances, conditions apply. Find out your income protection options and what’s covered with this to-the-point guide from Oiyo.

What is income protection?

If you’re unable to work due to sickness or injury, income protection insurance can provide you with a dependable income stream. It’s an important form of insurance as it protects you and your finances if you are unable to work. If you’re not receiving a working income or wage, you may not have enough savings or available cash to support yourself for an extended period of time.

In many cases, this policy can cover up to 85% of income that you earned prior to you being unable to work. The average cover, however, is 75% of your income. Typically, payments are calculated on a pre-tax monthly basis, as opposed to a lump sum payment.

If I’m self-employed, can I qualify for income protection?

Yes, in most cases, people who are self-employed can get income protection insurance. Income for protection insurance is for anyone who earns a consistent income. If you work more than 20 hours per week, you should be able to find a suitable policy. If you’re a freelancer, independent consultant or contractor, self-employed tradesman or a small business owner, you should also qualify for income protection insurance.

Why would you need income protection if you’re self-employed?

Being self-employed is an amazing experience, but it also comes with a few extra responsibilities as well. You may not have sick leave or annual leave to fall back on if you have to take some time off work. As amazing as self-employment is, you’re not guaranteed the same benefits as a salaried employee.

As humans, one of our most valuable assets is our ability to earn a working income. If we lose this ability to work and don’t have any accumulated leave to utilise, not only have you lost the use of a valuable asset, but things are likely to get tough fast.

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Key takeaways:

  • The average cover an income protection policy can provide you with is 75% of your income.
  • You must be working more than 20 hours per week to qualify for income protection.

Do you need income protection insurance?

Before you start researching insurance providers to find a policy suitable for you, you should first decide whether or not you actually need income protection. There are many different reasons you may decide that income protection is the way to go for you. Although, if you’re feeling a bit stuck, you should consider the following situations:

  • Do you have dependents like children and family members who rely on your income to survive?
  • Do you have significant financial commitments that you will be unable to meet if you are not receiving a working income, such as a home loan, car loan or large personal loan?
  • Are you self-employed, a freelancer or a small business owner who may not have sick leave or annual leave to utilise if you’re unable to work?
  • Would you be able to maintain your current lifestyle if you were not working?
  • Do you have enough savings to cover living costs or ongoing medical expenses in the event that you are sick or injured and unable to work for an extended period of time?

If you’re unsure if you would be able to maintain your current lifestyle, meet your financial obligations or you have someone who depends on your income to survive, income protection insurance might be a good idea to consider. It’s a way to ensure you won’t be hit hard, financially. Along with being able to meet your bills and support yourself and family.

Are there other options if I don’t want income protection?

Some people don’t opt for income protection insurance as they don’t want to pay expensive premiums every month for something they may possibly never need. And that’s totally okay! Income insurance isn’t going to be the right choice for everyone. There are other options out there that may be more suited to you and your finances.

One of the most popular alternative options to self-employed income protection insurance is to set yourself up with a dedicated savings account that you make regular contributions to. This option does require you to be strict in terms of consistently depositing money into the account. However, it is a great way to have available funds in the future if you need them. The tough part is being disciplined enough to not touch these savings unless it’s absolutely necessary.

A great way to steadily build your savings fund is to set up a direct debit for around the same amount as your income protection premiums would have been. This will ensure you’ll have available funds if you’re ever out of work in the future, and won’t be left in the lurch with no cash to draw on in the event that you are unable to work for a while.

Things to consider when choosing a policy

There are many things to consider when choosing a policy. Keep in mind these will vary depending on your personal preferences and the insurance provider. Consider what is important to you in a policy and take a few minutes to conduct a comparison of different providers to see what they offer and which is best suited to your needs. As a general rule of thumb, it’s a good idea to have a look at the following when deciding what policy or provider you are going to choose:

Waiting periods

The waiting period is the length of time you will need to wait before your benefit payments start after you have become unable to work. The waiting periods will differ depending on what provider you sign up with. Generally, they can be anywhere from 14-days all the way up to 2-years. If having a short waiting period is important to you, make sure you choose an insurance provider who offers shorter waiting periods.

You should be aware that the shorter the waiting period, the more expensive your premiums are likely to be. These slightly higher amounts may be worth it though, as you won’t have to go as long between being unable to work and your payments starting up. This could be a good idea for those who are self-employed as you may not have the sick leave or annual leave to get you through to the beginning of your benefit period.

Policy type

There are several policy types for you to choose from:

Agreed Value Policy:This is a policy where the amount you’re insured for is an agreed percentage of a specified amount when you sign up for your policy. The insured amount does not change, even if your income does. This can be a great option for self-employed individuals who typically have less consistent income that is likely to fluctuate. Due to the fact that the insured amount does not change, even if your income does, it is generally the more expensive policy type.

Indemnity Value Policy:An indemnity value policy, on the other hand, is a policy where the insured amount is a designated percentage of your income or salary that you’re earning at the time that you submit a claim. This means that your insured amount has the potential to change, depending on what you’re earning. This policy is great for individuals who have a fairly steady income that doesn’t tend to change too much. This tends to be the cheaper policy option.

Benefit period

The benefit period is the length of time that your income protection insurance payments will last for. The benefit period will be specified when first taking out your policy. Generally, most policies will offer benefit periods of between two and five years, or depending on your age, up to a certain age (usually 65 or 70). The benefit period is usually tailorable, meaning that for higher premiums you may be able to extend the length of your benefit period.


There are two types of premium that you might pay for your income protection insurance.

Stepped Premiums: Stepped premiums are insurance premiums that are recalculated at the beginning of each new policy renewal period. The premium will start off quite low. However, the price will increase each year as you get older and your health declines.

Level Premiums: Level premiums, on the other hand, are premiums that are not influenced by your age of health. However, These premiums may still increase over the years due to inflation or changes to the insurer’s fees. Due to this, level premiums will cost more initially but could end up saving you money in the long term.

These are some of the more important features that you will want to take a look at when it comes to your income protection insurance policy. While different people are going to prioritise different features, these are some important aspects to consider when doing your comparisons. You shouldn’t have too much trouble finding a suitable provider and it’s always worth taking a little bit of extra time to find a provider that works best for you.

What can income protection insurance be used for?

Self-employed income protection insurance can be used for a number of different reasons. Take a look at just some of the uses that your income protection can be utilised for:

  • Medical costs associated with your injury or illness;
  • Meeting your large financial obligations such as rent, mortgage, personal loans, or car loans;
  • Supporting yourself and your family;
  • Helping to provide for any dependents you might have that rely on your income to survive;
  • Covering ongoing household and personal expenses;
  • A living wage if you’re no longer able to work due to partial or total disability.

Getting income protection if you’re self-employed

Income protection insurance is incredibly important if you’re self-employed. As someone who works for themselves, you have to make sure you can meet your financial obligations and living expenses if you are unable to perform your work. Considering many self-employed individuals don’t have access to sick leave or annual leave, this makes income protection insurance that much more important.

Save yourself the stress of leaving things to chance and having nothing to support yourself with if the worst were to happen to you. Consider setting up an income protection insurance policy that will protect you and your finances in the future. If you don’t know how you would make your financial responsibilities or have dependents who rely on your income, income protection insurance is a great thing for you to consider. It may not seem like it now but income protection could be a huge relief for you in the future.

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Oiyo is a consolidated online resource, we are not financial advisors. We work with a range of industry professionals and compliance check our articles to ensure factual accuracy. However, we do not provide professional financial advice. Consider seeking independent legal, financial, taxation or other advice to check how the information and ideas presented in this article relate to your unique circumstances.

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Toni Petto

Written by Toni Petto

Toni Petto is a contributing Writer at Oiyo, specialising in finance, history and culture. She has a Bachelor of Arts in Anthropology and a Masters in Antiquities Trafficking and Art Crime Prevention from Glasgow University. She is currently a Freelance Writer and has previously worked within the finance sector.

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