Income protection for self employed parents

*Collaborative Post

 

After the crazy COVID-19 whirlwind that we are still in the midst of, we have learnt that life is truly unpredictable. Who could have anticipated the events of the last 12 months when we were entering into a new decade so full of hope?

 

All this change has got me thinking about safeguarding mine and my family’s future against the ‘what if’s’. Life insurance products are literally designed for the ‘what if’s’. You hope you never need to make a claim, but you pay for that peace of mind month on month.

 

Income protection insurance specifically has really moved into the spotlight since Coronavirus entered our vocabularies. Income protection is basically designed to cover a percentage of your salary (usually around 50-70%) if you become too ill or injured to work. Self employed people can also take out income protection and actually, it’s probably more important for them than anyone else!

 

How does income protection work?

As the name suggests, income protection protects your income! If something happened to you and you were too ill or injured to go to work for a prolonged period of time, income protection provides a percentage of your salary (usually between 50-70%) and enables you to continue meeting your financial responsibilities. Just thinking about how on earth we’d be able to cover all the bills and living costs if one of us were suddenly too ill or injured to work brings me out in a nervous rash!

 

The great thing about income protection insurance is that it pays out whilst you are still around to see the money benefit your family – as opposed to life insurance that only pays out on your passing away. For the ultimate protection, it’s a good idea to take out both. Income protection is also an attractive option as it pays out in regular, manageable chunks as opposed to one big lump sum. You can usually opt for your policy to pay out monthly or annually, depending on your preference.

 

When you take out an income protection policy, you choose how long your term will last. As a parent, this might be until your kids have grown up enough to be financially independent. It could be until the end of your mortgage term. If you do end up making a claim, your payouts will begin once your deferral period has passed. This is an amount of time that you decide on – the shorter the deferral period, the higher your monthly premiums will be. Once your payouts begin, they will continue until you recover and go back to work, reach state pension age and retire, or pass away during the period of the claim.

 

How does it work for the self employed?

As I mentioned before, this product is really important for the self employed. You don’t have an employer to fall back on when times are hard for support – it’s all on you! You could pin your hopes on qualifying for Employment and Support Allowance, which is financial support from the government if you are unable to work due to illness or disability. Income protection, however, provides you with much more money so if you can, factor it in as part of your business plan.

 

And there’s no need to worry about how your monthly income will be calculated. It’s actually pretty straightforward and insurance brokers are really familiar with helping self employed people take out income protection cover.

 

 

As a parent, you know that the world becomes somewhat of a scarier place once you bring your own children into it. The weight of responsibility can be heavy, so lighten it by taking out income protection and protecting the life you love. You will never regret that peace of mind that the right cover can provide!