Reply to: Income and sickness protection insurance

[Mark McBurney@CMME]

This is one area that definitely needs some advice as a contractor as, as yet, there are no providers who will cover flat contract rate (well, there is one however I have absolutely no confidence that they would actually pay out, based on our conversations with them).

You can only cover taxable income, which is fairly useless if you work through an umbrella scheme other than the 'onshore' types, as they'll cover your basic c.£10k a year and will only ever pay out a maximum of 60% of this (the idea being that it covers your basic costs and doesn't make it more attractive to stay off work), or as a LtdCo contractor salary and dividends. The problem is, however, that income verification is only at the point of claim, so it's entirely possible that you might take out a policy to cover you for, for example, £3,000 per month, and then you take a little less out of the company one year, and all of a sudden you're paying for cover that you can't get.

As above, some providers will pay out on 'day one' of illness, and you can generally choose whatever 'deferred' period (i.e. the time from being off work until you can make a claim) you want (the longer the deferred period, the cheaper the premiums - you're more likely to be off work for 4 weeks than 26), generally deferred periods are anywhere between 4 weeks and 26 weeks, occasionally 52 weeks.

Risky to go in 'blind' without some sort of advice, and it's fair to say that it's not for everyone, however it can be a massive, massive help if you're ever in the position of being unable to work long-term.

[BHicks]

I don't believe that this kind of insurance would pay out if you need it.

I'll bet that T&Cs would exclude most reasons for needing it.

That's where speaking with a professional financial advisor can pay dividends.

Dentist and General have a plan that will pay out from day 1, I've had this in place for some time and recently have had to make a claim against it due to an injury that meant I couldn't get near a keyboard (office or remote) for several days. I ended up having to get the GP to make a housecall and he couldn't believe that there were plans that would pay out from day 1 either.

You can also get plans that will pay out after 30/60/90 days as mentioned elsewhere. Those (as you may expect) can be cheaper due to their deferred nature. As everybody's needs and circumstances are different it's worth getting professional advice.

[SueEllen]

As other people have been saying, pretty unlikely to pay out. Despite the comments about insurance companies being thieves or not, the reality is that most insurers don't understand contractors, as such the products they offer don't really work. They basically understand Employed or Self-Employed, but not contractor ltd.

Hence why you need advice to confirm that the insurer will pay out to contractors.

There are other threads older threads on this and a couple of them mentioned some insurers by name, so it would be worth the OP using google to find them.

[psychocandy]

Looked into this in the past. VERY expensive it was.

[Stevie Wonder Boy]

Hi,

I have been contracting now for almost 3 years and have never taken out income or sickness protection insurance.

How many of you have this insurance and do you recommend it?
I am fortunate that I do build up a nice warchest every year so always have that to fall back on, mind you I have never been out of work for over a month.

What do you think?

As other people have been saying, pretty unlikely to pay out. Despite the comments about insurance companies being thieves or not, the reality is that most insurers don't understand contractors, as such the products they offer don't really work. They basically understand Employed or Self-Employed, but not contractor ltd.

[MyUserName]

You clearly haven't the privilege of working in insurance. Their ability to not have enough office space, stained carpets, desks, chairs etc is similar to other sectors I've worked for. In fact the only clients' I've had who haven't had issues with infrastructure are the ones where most of the work is done remotely well.

FTFY

[TheFaQQer]

IPSE+ membership give business interruption insurance if you are in contract an unable to work through illness. Every little helps.

[SueEllen]

Or ask yourself this simple question; if insurance is so great for the end user, how come insurance companies have such big flash offices and so much money?

You clearly haven't the privilege of working in insurance. Their ability to not have enough office space, stained carpets, desks, chairs etc is similar to other sectors I've worked for. In fact the only clients' I've had who haven't had issues with infrastructure are the ones where most of the work is done remotely.

[SueEllen]

Those policies also only pay out max 12 months (and if you're ill for more than 30/60/90 days).

Common mistake you have made you have mixed up permanent health insurance (PHI) with other forms of short term income protection.

PHI is the type you use to only be able to get from brokers after you gained advice. Now you can get it without the advice, but it's the type that pays out a sum monthly long term until you retire. You should really talk to a broker as some types are completely unsuitable for contractors due to our income being a mixture of salary and dividends. Some also refuse to pay out if your long term illness/'disability means you can do another occupation.

Other forms of income protection include accident, sickness and unemployment cover which are part of a mis-selling scandal. These types are unsuitable for contractors as your warchest should cover you for a minimum of 6 months if you are sick.

[kingcook]

I have a pretty healthy warchest, so not needed.

Those policies also only pay out max 12 months (and if you're ill for more than 30/60/90 days).

[Bacchus]

Hi, perhaps you would like to try this test. Sit down with your latest bank statement and a Highlighter. Mark off all of the essentials in your life; Mortgage, Council tax, Gas, Electric, Water, credit card & loan payments, food, transport costs, insurances. Then check your savings and work out how long the savings will last. Will they last until your retirement? If no, What plan do you have to maintain your lifestyle? No plan in place? Take Income Protection.

Where any insurance is involved, always look at the "what if...? How could I survive" scenario. If there is no answer, you need insurance.

Or ask yourself this simple question; if insurance is so great for the end user, how come insurance companies have such big flash offices and so much money?

Insurance is almost always a scam, the insurance companies make the money, not the punters, and if you look at the cost/benefit of income protection it is one of the worst, it really is an area where contractors need to "self-insure"

[cojak]

I don't believe that this kind of insurance would pay out if you need it.

I'll bet that T&Cs would exclude most reasons for needing it.

[John Constant]

Income protection

Hi, perhaps you would like to try this test. Sit down with your latest bank statement and a Highlighter. Mark off all of the essentials in your life; Mortgage, Council tax, Gas, Electric, Water, credit card & loan payments, food, transport costs, insurances. Then check your savings and work out how long the savings will last. Will they last until your retirement? If no, What plan do you have to maintain your lifestyle? No plan in place? Take Income Protection.

Where any insurance is involved, always look at the "what if...? How could I survive" scenario. If there is no answer, you need insurance.

[SueEllen]

Some people don't have it and others like me have it.

If you are going to take out a income protection policy (PHI) you need to ensure that it will pay out to contractors whose income comes from a mixture of wages and dividends. The premiums tend to be lower if you are male and younger.

[steve80]

Do what's right for your family and yourself. There's no rule on this.