Can you get income protection if you are self-employed?
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Can you get income protection if you are self-employed?
Anthony McQuilliam explains how income protection works if you are self-employed.
Podcast approved by The Openwork Partnership on 08/08/2025.
Can I get income protection if I’m self-employed? How does this work?
You can. Not every insurer will offer income protection to the self-employed, but some specialise in this area. Once you have a policy in place, if you are off work sick, you will receive a regular income.
You will choose a certain timeframe to wait for the payments to start. If, for example, you’ve chosen a deferred period of four weeks, after that you will get a constant stream of income until you’re well enough to go back to work – or to the end of the policy, depending on what you’ve chosen.
Do you need income protection if you’re self-employed? Is it mandatory?
It’s not mandatory at all. That’s the same with all insurance except buildings insurance, if you’re buying a house. If you’re applying for a mortgage, none of these protections are mandatory, although they are strongly advised.
The good thing about income protection is that it’s not solely linked to a mortgage. You could even be renting a property or living at your parents’ house. Ultimately, if you’re off work sick, you’re still going to want a stream of income. It’s definitely advisable to have something to protect yourself if you are unable to work.
What is the best income protection for self-employed people? Are there different options here?
What’s best for one person isn’t necessarily the best for anyone else. It massively depends on your personal situation – what your plans are, how long you want to be protected, what kind of payout you want, and how long you can wait for the payout to start.
We can’t just name the best kind of income protection. We have to have that conversation with you. We explore your plans and your situation and then give you advice around that.
How is income protection calculated for the self-employed?
Again, this massively depends on the provider, but it’s usually in the region of your annual income. For example, if your last two years’ profits average out to £50,000, we would use that as the calculation. We work backwards from there to decide a payout for you on a month-to-month basis. That would be the maximum amount the insurer would pay out.
However, you may not need the maximum. If you made a substantial amount of money last year, you may not need to have the full amount of your income covered.
For example, we might start at a £4,000 a month payout. We then adjust that around your situation and your plans, to find the best route for you to go down.
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How much income protection do you need when you are self-employed? Can you get 100% income protection? What is the main benefit of this?
How much you need, again, will vary on a case-by-case basis. There may be some people with Buy to Let property in the background, or where your business runs on its own without you.
These clients may not need as much as somebody that receives nothing if they don’t work. The income protection you need is based around your personal situation.
You can’t get 100% income protection. It’s usually a percentage in the region of 70%. If you earn £10,000 per month, for example, the maximum you’d be able to claim would be £7,000 a month.
The benefit of income protection is peace of mind. If you can’t work, you’ve still got a constant stream of income, which puts you in a much better position.
How much is income protection per month? Does this vary?
It depends on multiple factors. Age comes into it – the older you are, the higher chance you’ve got of claiming. The same goes if you’re a smoker, and they will charge you more if you’ve got underlying medical issues.
It will cost less if you can wait three months for it to pay out, rather than four weeks. There are many different variables to dictate the price. Even for one person, there could be five or six different options we can present, each completely different – and much more variation from person to person.
Are there any risks of having income protection?
Not necessarily. As long as you’re very truthful and honest about any medical issues up front, and the insurers are happy to insure you based on their particular terms, there is no risk, really.
I suppose the only element of risk is if you pay for it up to the age of 70 and you don’t make a claim, you may feel like you’ve wasted your funds. However, according to risk calculators online, the statistical chance of somebody having to claim between the age of 25 and retirement age is scary. The chances are that you will have to claim on something like this over the period of a mortgage or until your retirement age.
Can I claim income protection as a business expense if I’m self-employed?
We can’t give advice on that side of it, but there is a particular kind of executive income protection for a business. There are certain policies you’d have to take to do this through your company.
How long will my self-employed income protection insurance policy pay out for?
It depends on what you’ve decided. You can get cheaper income protection policies that pay out for a year, two years or five years, for example. Obviously, the shorter term it pays out for, the cheaper the premiums are.
Other policies will pay out all the way till the end of the plan, which is usually your stated retirement age. So again, it depends on the policy.
Imagine you had a cash machine in your front room and every month it spat out £3,000. If that machine broke, the income would stop. Most people would pay a certain amount to insure that machine. In reality you are that cash machine, and illness would stop that money coming in.
You’d be surprised how few people have savings. How long would you actually last without any income coming into your household? It’s definitely advisable to have even a smaller amount if you can’t afford the bigger policies.
If I do not earn the same salary each month, how will my income be protected?
It will be assessed on your profitability for the last 12 months. Most self-employed people’s income fluctuates. We would look at your profit for the last year and base everything from that.
How can a mortgage broker help when it comes to income protection for the self-employed?
Not all banks offer self-employed income protection. Having a conversation with a broker who has access to multiple insurers will increase the chance of you finding different policies, rather than speaking to your bank. We have access to different options available with the insurers, rather than just having the one like a bank.
Approved by The Openwork Partnership on 08/08/2025.
Your home may be repossessed if you do not keep up with your mortgage repayments.