Self-employed income protection
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Written by:
Richard Johnson
Ascot Protection Expert
Last Updated:
08.05.2025
Written by:
Richard Johnson
Ascot Protection Expert
Last Updated:
08.05.2025
Self-employed Income Protection
Self-employment comes with lots of perks, including the freedom and flexibility to work when, where and how you want. But there are also downsides to being your own boss, including lack of access to employee benefits such as sick pay. This could leave you financially struggling if you ever can’t work due to serious illness or injury.
This is where self-employed income protection comes in, covering some of your regular income if you can’t work. This can mean that essential bills and mortgage payments are taken care of, so you can focus on recovery.
Get in touch with Ascot Mortgages for a chat about how income protection insurance could help you, and to find the perfect policy for your needs.
What Is Self-Employed Income Protection?
Self-employed income protection is a type of insurance designed to replace a portion of your income if you’re unable to work due to illness, injury or accident.
As a self-employed individual, you don’t have the benefit of employer sick pay, so this type of cover can provide a financial safety net. It ensures that you can continue to meet your regular expenses like mortgage payments and bills while you recover.
Do You Need Income Protection Insurance If You're Self-Employed?
If you’re self-employed, income protection insurance can be crucial. Without the stability of a regular employer-backed income, any period of downtime due to illness or injury could lead to significant financial strain.
Self-employed income protection helps protect against the risk of lost earnings, ensuring you receive a regular payout when you’re unable to work.
Why Self-Employed Income Protection Matters
For many people working for themselves, their income is entirely dependent on their ability to work. If you are a freelancer, contractor, or business owner, an unexpected illness or injury can have a profound impact on your ability to earn.
Without the safeguard of self-employed income protection, even short-term sickness could mean losing clients or facing financial difficulties.
How Does Self-Employed Income Protection Work?
Self-employed income protection policies typically pay out a percentage of your regular income if you’re unable to work due to illness, injury, or accident. It’s usually between 50% and 70%, although it varies between insurers and policies.
Payments are typically made monthly, and you can choose how long you’d like the payments to continue for, depending on the policy. The duration of cover can be anything from a few months to a longer-term policy until you’re able to return to work or reach retirement age.
When you take out income protection insurance as a self-employed person, you’ll have the option to select a deferred period. This is the time you must wait after falling ill or getting injured before your policy starts to pay out. The shorter the deferred period, the higher the premium.
Does Sick Pay for Self-Employed Workers Exist?
Unlike employees, who may receive statutory sick pay (SSP) from their employer, self-employed workers do not have access to sick pay from the government.
This is why sickness insurance for self-employed individuals is critical. It acts as a substitute for sick pay, ensuring you have a steady income while you’re unable to work.
What Does Self-Employed Income Protection Generally Cover?
A self-employed income protection policy usually covers:
- Illness or injury that prevents you from working.
- Accidents that result in time off work.
- Longer-term conditions that keep you out of work for extended periods.
- Certain mental health issues, depending on the policy.
Some policies offer self-employed injury insurance or self-employed accident insurance as specific add-ons to cover injuries and accidents that directly impact your ability to work.
Ultimately, the aim is to ensure that you have regular monthly income to help cover essential expenses such as mortgage payments, bills, and other costs.
Are There Any Exclusions?
Not every illness, injury or situation is covered by income protection insurance. Most policies will not cover:
- Pre-existing injuries or illnesses
- Self-inflicted injuries
- Illnesses or injuries resulting from illegal activities.
How Much Self-Employed Income Protection Cover Do I Need?
The amount of cover you need depends on your personal circumstances, including:
- Your regular monthly income: Choose a policy that covers 50% to 70% of your usual income.
- Your monthly expenses: Make sure the policy will provide enough to cover essential outgoings such as rent, mortgage, utilities, and food.
- The length of time you want to receive payments: This could be for a few months, until you’re able to return to work, or up to retirement age.
It’s essential to assess your financial commitments and how long you could realistically manage without an income before deciding on your coverage amount.
How Much Does Income Protection Insurance Cost?
The cost of income protection insurance for the self-employed varies depending on factors such as:
- Your age: Older individuals may face higher premiums.
- Health and lifestyle: Smokers or individuals with pre-existing medical conditions might see increased costs.
- Type of work: Certain jobs considered high-risk, such as manual labour, can attract higher premiums.
- The deferred period: A longer deferred period (the waiting period before payments begin) will generally lower the premium.
On average, premiums can range from £10 to £50 per month, depending on the level of cover and policy details.
What Other Insurance Policies Should Self-Employed People Consider?
Aside from self-employed income protection, there are other insurance policies that self-employed workers, freelancers and sole trader business owners might want to consider for comprehensive protection. These include:
- Self-employed loss of earnings insurance – cover for more extensive periods of downtime due to loss of business or client contracts.
- Critical illness cover – a lump sum payout if you’re diagnosed with a serious illness like cancer or heart disease.
- Self-employed personal insurance – this includes policies such as life insurance or accident insurance, protecting against more severe scenarios like death or permanent disability.
- Business insurance – for those who run their own business, where policies include public liability or professional indemnity insurance.
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Your Self-Employed Income Insurance Questions Answered
A deferral period is the time between when you stop working due to illness or injury and when your self-employed income protection policy starts to pay out. The length of the deferral period can affect your premium: shorter periods usually result in higher premiums, while longer periods can reduce costs.
No, most income protection insurance policies for the self-employed will only cover a percentage of your income, typically between 50% and 70%. This ensures that you still have a financial safety net without providing an incentive not to return to work when you’re able.
Yes, income protection insurance can cover short-term sickness, depending on the policy and deferred period. Some policies are designed to cover both short-term and long-term absences from work, so it’s essential to choose the right one based on your needs.
Most self-employed income protection policies do not include critical illness cover as standard, but you can add it as an optional extra. Critical illness cover provides a lump sum payout if you’re diagnosed with a serious condition such as cancer, stroke, or heart disease.
An important thing to know about income protection insurance is that nearly all policies have what is known as a ‘deferred period’. This is essentially a waiting period, after which the policy will start paying out.
This varies between providers and policies, and it can range from anywhere between 1 and 100+ weeks. You can choose a shorter deferred period, but you should be aware that this usually means higher premiums.
If you’ve changed your mind about self-employed income protection cover or your circumstances have changed, you’ll usually have around 30 days to cancel your policy for a full refund. After this period, you can cancel your policy but you may not receive a refund.
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