Income protection for homeowners

22nd May 2019


When you become a homeowner, it’s likely that your biggest monthly outgoing will be for your mortgage. But what would happen if you can’t keep up with your repayments? As a Contractor, you could be at risk of missing a payment and having your home repossessed if you’re unable to work due to illness.

When you work for yourself, you can no longer rely on an employer to cover you for illness or injury. This is why it’s important to have Income Protection in place when you’re a Contractor.


What is income protection and how does it work?

When you become ill or have an accident and are unable to work, your income would cease meaning and you may have to dip into your savings to keep up with mortgage payments among other bills. That can be prevented by protecting your income. Income Protection is an insurance policy that’s designed to help cover you if you’re unable to work due to sickness or injury. With long term Income Protection, it ensures you continue to receive a regular income until you retire, pay off your mortgage or are able to return to work, leaving your savings untouched.

Income Protection works by replacing between 50% to 70% of your salary and dividends so you can stay on top of your outgoings without having to worry. It’s important to keep in mind that the percentage of your income that you can protect will vary between insurers so it’s a good idea to speak to an expert insurance adviser can help find the right policy for you.

Another thing to keep in mind is that Income Protection is not going to cover you when you are between contracts. This is a common misconception of the product. Income Protection will only cover you for a serious illness that prevents you from working. It is also different from Critical Illness cover which pays out a one-off lump sum if you’re unable to work due to a serious illness.


How can I claim?

Normally there is a waiting period before the payments start after having made a successful claim. Typically you would set up payments to start once the deferral period ends. The deferral period is the time between when you stop working and when you want the policy to start paying out – it can be anything from 2 weeks to two years. The longer you wait, the lower your monthly premiums are likely to be.


Can anyone get income protection?

Income protection is available for anyone to take out but it’s especially important for Contractors as you don’t enjoy the benefits such as sick pay that ‘regular’ employees can receive. There are a number of factors that could implicate the cost of your Income Protection cover. These include:

  • Age – the older you are, the more at risk you are to illness
  • Job – if you’re considered to work in a high-risk industry
  • Whether you smoke or have previously smoked
  • Health – including your weight and family’s previous medical history



Find out if Income Protection is right for you by getting in touch.

All content is accurate at the time of publication

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