This page aims to provide some useful information for the self employed in relation to the types of personal insurance policies available to them. It is true that most policies in the market are targeted towards those who are employed but this does not mean that the self employed cannot be arrange protection cover. On the contrary most (but not all) plans are suitable for the self employed also. This guide page aims to discuss which plans are important for this group and which plans should be avoided (although it is not always very clear-cut).
I start by evaluating why the self employed should consider insurance in the first place and then discuss some suitable policies. No matter our employment status we all face the same personal financial risks in life, the only real difference is the extent to which these risks are prominent. The main risk that can be insured relates to ill-health. If we are employed then we might get sick pay or have a health and protection insurance policy provided by our employer. Unfortunately, this is not the case for the self employed, they have to rely on themselves to arrange adequate health and protection cover. This naturally leads to two important insurance plans: self employed private health insurance and self employed income protection (also known as permanent health insurance).
Firstly, health insurance for the self employed is a vital method of returning to work as quickly as possible after an illness or injury. With such long waiting times in the National Health Service (NHS) holding private medical insurance could be a business saving move, after all the self employed have to rely completely on their own business to earn an income.
Although health insurance is vital to those who are self employed it could be argued that income protection (also known as permanent health insurance) is even more important as it directly protects the earnings of the policyholder. There is no doubt that income protection / permanent health insurance is valuable for both the employed and the self employed. The main difference is that the self employed will definitely have to arrange cover themselves as they do not have an employer who could potentially include them as part of a group insurance scheme. Those who have their own businesses should also set the deferred period at a lower level as they will not have the protection of statutory sick pay.
It is important to note that the cover provided can vary depending on your occupation class. If any manual work is required then the insurer will usually use a 'work tasks' definition, which covers basic activities such as talking, sight and bending. Thus, for the policy to payout for manual workers a fairly serious injury must have occurred (such as a broken leg). As a result, the relative value of self employed illness income protection is higher for office based roles than for manual roles.