Income Protection

[Andrew@Drewberry]

Income Protection for Contractors

Hi tkmk

If you are considering Income Protection insurance when you go speak to your Financial Adviser make sure he is properly up to speed on his protection products.

Below are a few key things you want to look out for -

If you are setting up as a Company Director there are two types of income protection you can consider -

Personal Income Protection
This is your standard income protection product, the policy is owned by you and paid from your net earnings. With a personal income protection policy you can usually cover between 50%-65% of your gross earnings and any benefit payable should a claim arise is paid out tax-free.

Executive Income Protection
The policy is owned by the business and underwritten on the life of a employee(you), should you be unable to work due to any illness or injury (after the initial deferred period) the policy will pay a monthly benefit to the business of up to 80% of the your gross earnings (...this can include Company Directors dividends). The benefit paid out to the employer can then be used however the business requires however it is most often used to be paid out as sick pay.

Don't confuse traditional Income Protection with Payment Protection Insurance
There are a few payment protection providers out there who are dressed up to look like income protection products however the quality of the policies are worlds apart. Wherever you end up taking out your income protection policy please make sure of the following.

• Make sure the policy covers you in your 'Own Occupation', some policies out there only cover you in a 'Suited Occupation' or if you are unable to do a set number of daily tasks (such as walking up stairs).
• Make sure the policy is fully medical underwritten, like with life insurance traditional income protection products require a full health and lifestyle declaration when applying so you know exactly where you stand from the outset. (Most traditional income protection insurers have no standard exclusions)
• The policy has guaranteed premiums, there are some less expensive policies out there that offer reviewable or age costed premiums however over the life of the policy these tend to work out more expensive as the premiums rise considerably with age.

I hope this all makes sense, any queries let me know.

Best of Luck
A

Andrew Jenkinson
Founder of Drewberry

<Admin note>Seems like good info to me. Link removed as per Ts and Cs - if you want to check them out just Google Drewberry</Admin note>

[kaiser78]

I have this cover and pay a pretty low monthly amount to provide sufficient cover reqd for my circumstances if I am after work for longer than 2 months. Seek the advice of an IFA as well worth having for piece of mind.

[geoffreywhereveryoumaybe]

Income Protection - its a con

Never heard of anyone managing to make a successful income protection claim.

I used to contract with a colleague for one of the UK providers and he took out income protection cover and then his young child had a serious medical condition that entailed the parents staying with him at Bart's in London and so he took a couple of weeks of work.

And when he made a claim on the policy - they turned him down.

[tkmk]

northernladuk and Dan, thanks for the additional suggestions. I look into those too.

[northernladuk]

Might be worth thinking about private healthcare as well, longer you are off your feet the longer you don't earn. Could work out in your favour sometime.

[ClearSky Accounting Dan]

Some accountants also include income protection/critical illness cover in their monthly packages

[tkmk]

Here are a number of links where Income Protection has been discussed before.

HTH

income protection site:forums.contractoruk.com/accounting-legal/ - Google Search

income protection site:forums.contractoruk.com/business-contracts/ - Google Search

Great, thanks I look into these. I've only spotted a really useful thread.

Thank you.

[tkmk]

You mean for in case you become sick or have an accident?

That's right.

[tkmk]

My advice would be to choose a financial advisor who specialises in contractors. A financial advisor in this field will/should be fully aware of how a contractor works, especially around the different trading styles (e.g. working through an umbrella and then setting up a limited company) and should make your life easier in dealing with them. Maybe not a big issue in terms of setting up income protection but i've seen contractor specialist financial advisors make a big difference on things like mortgages.

Hey, that's very useful. I'll looking into that.

Thanks!

[northernladuk]

Here are a number of links where Income Protection has been discussed before.

HTH

income protection site:forums.contractoruk.com/accounting-legal/ - Google Search

http://www.google.com/search?hl=en&q...racts%2F&meta=

[escapeUK]

Hi guys,

Another newbie question from me! I'm switchin from using an umbrella company to my own limited company. I've decided that I would like to get Income Protection.

You mean for in case you become sick or have an accident?

[ClearSky Accounting Dan]

My advice would be to choose a financial advisor who specialises in contractors. A financial advisor in this field will/should be fully aware of how a contractor works, especially around the different trading styles (e.g. working through an umbrella and then setting up a limited company) and should make your life easier in dealing with them. Maybe not a big issue in terms of setting up income protection but i've seen contractor specialist financial advisors make a big difference on things like mortgages.

[tkmk]

Hi guys,

Another newbie question from me! I'm switchin from using an umbrella company to my own limited company. I've decided that I would like to get Income Protection.

Does anybody have any insurers that they would highly recommend? And for what reasons?

A friend has referred me to a financial advisor, but I'm not sure whether this is necessary when I could conduct a quick bit of research myself online and in forums.

Any advice would be appreciated!

Thank you.