If you can’t work, you can’t earn – unless you have Income Protection.
People in permanent jobs have the benefit of receiving sick pay. As a Contractor, you don’t have this luxury which is why it’s so important to have Income Protection. It gives you the peace of mind that if you become ill, you’ll be paid a regular wage so you can look after the bills until you’re well enough to return to work.
Income Protection – what you need to know
Provides a regular wage if you become ill
Usually 50% -70% of your normal income
Pays out once a ‘deferral period’ has passed
The longer the ‘deferral period’, the lower the monthly premiums
Covers you until you’re well enough to work again
Cover only lasts while you keep up monthly payments
Pay out is tax free if paid from your own pocket
Tax deductible if paid for through the business, but you will be taxed if you make a claim
What’s the difference between Income Protection and Critical Illness cover?
The major difference is that Income Protection is for illnesses where you are expected to make a recovery. The money is there to tide you over. However, Critical Illness assumes that you are not going to make a recovery and will not be well enough to work again e.g. a tree surgeon who becomes wheel chair bound. The one-off payment Critical Illness provides is to look after you and your family for the foreseeable future.
As with all protection, getting the details right is crucial. This is where the small print can trip you up. No problem, we can put policies into plain English so you know exactly what you’re covered for. We’ll also make sure any policies adequately cover your needs so you’re not left high and dry should you become ill.
The cost of cover is likely to be an important consideration. Many of our customers ask why it appears expensive in comparison to life cover. The reason is that statistically you are two-and-a-half times more likely to suffer a critical illness that you are to die before the age of 65.
Tax information
Typically the premiums aren’t tax deductable and will need to be paid out of post tax income, or will be considered as a benefit. However, any benefit received will be tax free.
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