Accident and Sickness Insurance for Self Employed

Reducing the risk of Self Employment

Accident & Sickness Insurance is a highly effective yet under-utilised tool which self-employed professionals can use to help protect their income against the unwanted scenario whereby their health prevents them from being able to earn an income.

Whilst self-employment can offer some great freedoms and attractive opportunities, it arguably comes with greater exposure to risk. By default, the lack of any employee benefits or statutory sick pay is something that the UK’s 4 million self-employed workers would all like to offset.

The good news is that a number of insurers offer specific accident and sickness policies which can be tailored to meet the needs and budgets of UK’s diverse self-employed workforce.

What is self-employed sickness insurance?

A type of insurance policy which is designed to provide financial assistance to self-employed individuals in the event that they are unable to work as a result of an accident, injury or illness.

When a new policy is first set up, the policyholder choses a percentage of their pre-tax earnings to insure which is generally between 50% – 70%. Should the policy holder then make a valid claim then the insurer will typically pay a monthly benefit until either the policyholder can return to work, or, the benefit period (anything from 12 months up until retirement age) comes to an end.

These policies are very similar to general Accident & Sickness policies but tailored to better meet the needs of self-employed professionals, contractors and company directors. Importantly, when considering the level of annual earning that can be protected, dividend payments can be included. This is often an important point of difference for company directors who may receive a significant portion of their earnings through dividends.

Why accident and sickness insurance is so important for the self-employed?

In the event of an accident or illness, self-employed individuals often find themselves in a far less favourable position than if they were pursuing their occupation as an employee.

Unless the necessary protection is in place, a lack of employee benefits equivalent to enhanced sick pay can mean that the inability to work quickly leads to financial difficulties. A sudden drop or the complete halt of any income can mean that mortgage payments, utility bills, and the general cost of living can quickly become overwhelming. To make matters worse, there’s still likely to be a business to run and clients to look after.

With Statutory Sick Pay (SSP) not available to the self-employed, for many people, any available support from the UK benefits system is likely to fall short of a bare minimum income.

This is where self-employed accident and sickness insurance can prove to be essential. Providing financial security and allowing individuals to focus on their recovery without the added stress of financial pain. Even for those with those with a substantial financial buffer, this type of policy can help ensure any hard-earned savings remain available for their intended use.

What does it cover?

Generally, the terms of an accident and sickness policy are quite broad and are likely to cover any accident or illness which prevents the policyholder from being able to work. The definition of what constitutes a valid claim is likely to be more focused on whether the illness or injury is preventing the insured party from being able to work as opposed to a specific diagnosis.

What doesn’t accident and sickness insurance cover?

If the issue preventing the policyholder from being able to work is due to a pre-existing medical condition, then, in general, it is unlikely to be covered although this will depend on how the policy is underwritten and the specific situation.

Policies will often exclude stress, mental health issue and, unless additional cover is acquired, injuries that are caused pursuing hazardous pastimes.