Income Protection 

Securing protection for self-employed clients

This article is part of
Guide to advising the self-employed

Securing protection for self-employed clients

When advising self-employed clients, it is crucial advisers build insurance policies to match them.

While being self-employed does not necessarily make access to insurance more difficult, it is vital individual circumstances are thoroughly considered.

Essentially, this means advisers need to build and find protection policies to match the specific needs of the self-employed client, says Kathryn Knowles, managing director of Cura Financial Services.

Ms Knowles explains: “Arranging life and critical illness insurance when you are self-employed is no different to employed workers in most circumstances for personal or business protection.”

She suggests the trickier part can be finding the right income protection and unemployment cover, while the main consideration for the client is their occupation class and affordability.

Ms Knowles adds: “It is more the income protection side of things that has a few quirks, and I do think that speaking with an adviser is a good idea.”

Protecting income

Whether the client is a sole trader or a director of their own company, IP can be arranged subject to the policy terms and conditions and personal circumstances, suggests Jiten Varsani, mortgage and protection adviser at London Money.

He explains: “There is often a misconception that those who are self-employed have a greater need for protection advice than those who are employed.

“Though this may be the case in certain circumstances, it really does come down to the benefits offered to those who are employed.”

And for those running and employed by their own limited companies, it is possible to make the premiums of some life insurance policies, or  'relevant life' plans, tax-deductible, according to Philip Hanley, director and independent financial adviser at Philip James Financial Services.

So there should be no significant differences in the ability of business owners to get life or critical illness protection, which would be underwritten based on health.

Mr Hanley adds: “Any occupational restrictions for dangerous jobs would apply whether they are employed or self-employed.”

Nevertheless, it does not have to be any more difficult than finding suitable protection policies for an employed worker.

“Depending on the nature of the work – contracts and gig-workers – it may need some extra consideration,” says Ms Knowles.

“Unemployment is the trickiest. It is possible, but proof of unemployment at claim stage is harder to confirm," she continues. "Some income protection policies, though, guarantee a monthly benefit of £1,000 even if the person earns less than this (no financial proof at point of the claim).

"Some also offer a guarantee of £1,500 per month, even if income fluctuates, as long as you provide proof of earnings soon after the policy commences."

She adds: “Some people class themselves as self-employed but actually own limited companies, which can open up a whole new world of products when it comes to group protection."