Freedom Isn’t Free UK Personal Finance
Self-Employed
Income Protection Self-Employed UK: Is It Worth It?
Income protection pays you a monthly income if illness or injury stops you working. The self-employed get no Statutory Sick Pay, so the income stops the day you do. Premiums on a personal policy are not tax-deductible, but the benefit is paid tax-free.
Income protection for the self-employed: the terms that matter
| Term | What it means for you |
|---|---|
| Deferred period | The wait between stopping work and the first payout (commonly 4, 8, 13, 26 or 52 weeks). With no sick pay to bridge it, this is really "how many weeks of emergency fund do you have" |
| Monthly benefit | What the policy pays each month while you cannot work. Usually capped around 50-65% of your gross income, illustrative only |
| Benefit period | How long payouts last per claim: a short-term policy stops after 1, 2 or 5 years; a full-term policy can pay until you recover, retire or die |
| Own-occupation | It pays out if you cannot do your own job. The strongest definition for a skilled trade, and usually the one worth paying for |
| Suited-occupation | It pays only if you cannot do your own job or any similar job your skills suit. Weaker than own-occupation |
| Activities of daily living (ADL) | It pays only if you cannot perform basic tasks like washing or dressing. The weakest definition, and easy to mistake for full cover |
| Statutory Sick Pay (SSP) | GBP 0 for the self-employed. SSP requires employee status; it is up to GBP 123.25 a week for up to 28 weeks for employees only |
| Premiums (personal policy) | Not an allowable expense against your self-employment profits |
| Benefit (personal policy) | Paid tax-free, under S735 ITTOIA 2005 |
| Guaranteed vs reviewable premiums | Guaranteed premiums stay fixed for the term; reviewable premiums start cheaper but the insurer can raise them |