Personal insurance when you’re self-employed
If you’re self-employed, or thinking about going down that road, it’s important to consider your personal insurance options. This is because when you’re self-employed you don’t have an employer to rely on for sickness cover, or health insurance, for example. This guide will help you work out what you need and where to get it.
What insurance will you need?
When you become self-employed, you’ll need to think about what will happen if you can’t work because of illness or injury.
Because you’re working for yourself you won’t get sick pay, although you might qualify for state benefits.
Many self-employed people take out income protection insurance and critical illness cover in case they get too sick, or injured to work, or get a serious illness. Life insurance is also common for people who have dependents, such as a partner or children.
There are a range of personal insurance products worth considering if you’re self-employed.
This is a long-term insurance policy, that usually lasts many years and is designed to support you if you can’t work because you’re sick or injured.
It aims to replace part or all of your previous after-tax income. It is intended to pay out monthly payments up to your normal retirement age if you lose your job through illness or injury.
Critical illness cover
This is a long-term insurance policy which usually pays out a tax-free lump sum if you are diagnosed with one of the serious illnesses covered by your policy.
These usually include some cancers, heart attack and stroke.
It is designed to pay off debts, or a mortgage, or pay for any alterations needed to your home – for example, so you can use a wheelchair.
Only selected conditions are covered by these policies. Common illnesses that keep people off work such as back problems and stress are not covered.
This insurance will pay your dependants a lump sum, or regular payments, if you die.
You might have had life insurance as part of your package if you were employed – this is often known as death-in-service benefit.
This will have ended when your employment stopped.
Life insurance is worth thinking about if you have children or other dependents you look after or who depend on you financially.
You can’t rely on the government to take care of your family – the money they would get from the state is much lower than most people expect.
Private medical insurance
This insurance can supplement what’s available on the NHS.
Some self-employed people choose to take out medical insurance because they want to guard against being off work and losing earnings if waiting for NHS treatment.
Your employer might have offered this health insurance as an employee benefit, but once you become self-employed you’re no longer eligible for it.
If you can afford the premiums, it might be worth considering as it gives you a choice in the level of care you get and how and when it is provided.
If you were previously employed and benefited from insurance, for example, life insurance or private medical insurance, then you might be able to continue with the same providers.
Check with the provider how much it would cost to continue with the cover.
It’s likely to be more expensive for an individual policy than it was when you were employed.
It’s also a good benchmark to allow you to compare prices and policies when shopping around.
Running a business from home
If you run your business from your home you shouldn’t assume that your personal household insurance will cover you, even though nine out of ten home insurance policies will cover business equipment in your home.
Typically, cover will depend on the use of the home being for clerical purposes only (i.e. office work).
But you will not be covered if you have any visitors to do with your business (e.g. client visits).
If you’re setting up your business from home, the best thing to do first is to talk to your current insurer and explain your plans.
They might ask for an additional premium on your current insurance.
If you don’t tell your insurers and you need to make a claim, you might find that your insurance is invalid and that the claim won’t be paid.
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