Contractor Income Protection

When serious illness strikes, how are you going to protect your income?

Trying to stretch our income further than our expenditure can sometimes feel like the impossible dream. In the event of serious illness, how on Earth could we keep pace with expenses without some means of income protection?

Most of us think we’re invincible. We’re great today and it seems that it will always feel this way. Yet information from the DWP somewhat contradicts that optimistic outlook. 1 in 7 of us will, at some point in our working life, have 6 months or more off work due to incapacity.

Whether that’s due to serious illness or an accident, whether you’re a direct employee or contractor, incapacity simply doesn’t care. And it won’t box your convalescence time into handy frame of 3, 6, 12 months or longer, either.

How can contractors protect their income?

For those in full time employment, there’s the safety net of sick pay, at least up to a point. But what would happen to you as a contractor if you were unable to work?

There are certain bills that are deemed as necessities or essentials. They’re the mortgage or rent, secured loans, council tax, gas, water and child support, if applicable. Just tot those up and see how much you have to earn to cover those basics.

Then there are the unsecured loans, credit cards, putting food on the table and entertainment. What would you do for 6 months at home recovering from serious illness without digital TV or the Internet? Now work the total out and add it to your ‘basics’.

It’s scary, isn’t it!? If you have started saving, over and above that set aside to pay your tax bill, how long would those savings last in times of illness based on what you have to shell out every month?

Hey, I’m okay. What’s the worst that could happen?

What would happen to:

• your credit rating if the unsecured loans went unpaid?
• your home and your family if the mortgage or secured loans couldn’t be met?
• your sanity if you only had terrestrial TV and no mobile phone contract?
• your social life without social media?

Without serious illness cover, any little luxuries would be sacrificed as every penny goes towards the necessities.

However, there is a way you can safeguard it all. You can receive payment when you’re ill to cover all or some of the expenditure you’ve calculated back there.

It’s called an income protection plan and it pays a tax-free amount, up to the amount you insure yourself for, until you’re fit to work again.

In addition, it will help to zone off your savings so that they help you get back into the swing of things when you’re recovered, not so that you need them to support the recovery itself.

We’ve helped many contractors secure generous income protection plans that have paid up to retirement date in certain cases. Here’s what some of our customers are saying about the services we provide:

Why risk contracting without a safety net?

Permanent Health Insurance (PHI) is a way of seeing contractors through tough periods when they’re unable to work due to ill health.

By investing a little every month into a PHI policy (also known as Income Protection) may prove to be financial salvation for contractors when they can’t work. Furthermore, it can help keep them a float if forced into retirement by an injury.

PHI is designed specifically to meet the needs of the contractor. Within the structure of the plan, many aspects ensure that a contract worker never has to suffer financially if forced to cease work.
Included in the plan is:

• the presence of a tax free monthly income that will be paid following a predetermined length of illness. This in turn will continue to be paid until a full recovery is made, or until retirement
• the assurance of no more than the deferred (waiting) period agreed by the PHI provider and the individual involved
• the assurance that you will be able to look after your family and maintain a certain standard of living even though you may never be able to work again

When agreeing on the deferred period, it will be brought to the contractor’s attention that the longer the length of time agreed before the policy begins to pay out and the illnesses covered will influence the cost of the premiums.

Installments will be lower the longer the deferred period you choose.

Tips to Help Choose the Right PHI Plan

The contractor can cover up to 75% of their income. Quite obviously, the more one decides to cover, the higher the monthly premium.

Remain realistic in calculating how much you need to cover. If you work out your cover based on a smaller monthly premium, it would result in less coverage for you and your dependants should there be the need to claim.

When taking out the serious illness cover, make sure that the policy covers your particular skill. This ensures that when you cannot perform that skill due to sickness, the policy provider must pay.

If your skill is not highlighted within the list of those covered, the policy provider may insist that you carry out another menial job. Like any insurance, make sure that the policy you’re contributing to has no reason not to pay out when you claim.

Check that the PHI company you select has a good record of paying out. The waiting period can cause additional stress at a time when you need rest and relaxation.

You need to be working with an organization you can put your trust in. A simple Internet search for reviews of the company you’re considering may help you reach your decision.

Ensure that the policy covers you right up until you reach your retirement age. Small injuries and failed surgery can turn routine corrections into life-long damages.

Make sure your policy takes inflation into consideration. It must be stated that there is an allowance for change in regards to a fixed percentage or the Retail Price Index.

Income Protection means just that – when you cannot earn, your income and standard of living, remains safeguarded. We all know it, we just need a helping hand to show us where to start.

If you have any queries or wish to discuss serious illness cover further, let one of our knowledgeable advisors guide you towards a reputable PHI provider.