Do I need Protection and what is this?
No one wants to think about the impact of their death or serious illness on their family, but it's an unfortunate reality that many of us will have to plan to secure our loved ones' futures.
Why should I have personal protection as a contractor?
As a contractor, you won't receive any personal protection insurances as standard from your employer and will, therefore, need to source these yourself to protect you and your family from the unexpected.
Personal protection comes in a variety of forms and can help to ensure that you're able to continue paying bills, repay your mortgage or replace an income should you be unable to work or if you pass away.
According to a 2019 report from the ONS, 1 in 5 people in the UK have no savings at all and almost a third of households have less than £1,000 in the bank. With life insurance premiums starting from just a couple of pounds per week, these personal protection policies can be much easier to pay for rather than long term savings.
What personal protection policies are available for contractors?
The most common personal protection products sourced by contractors tend to be life insurance, critical illness insurance, income protection benefit, and family income benefit.
These policies are designed to pay out either a fixed lump sum or a monthly amount should you die, be unable to work, or are diagnosed with a serious illness.
Read on for a brief overview of each personal protection policy.
Life insurance for contractors
Life insurance is available for contractors to leave a lump sum behind for their family should they pass away during the term. A level term policy will pay out a fixed sum while a decreasing term policy will pay off the remaining balance of the mortgage. More on Life Insurance
Critical illness cover for contractors
Critical illness insurance protects you against a wide range of serious illnesses, including certain forms of heart attacks, cancers, and strokes. The lump-sum can help you to replace your income, pay for medical costs, or simply to provide a financial cushion whilst you get better. More on Critical Illness
Income protection for contractors
Income protection insurance provides you with a replacement income should you be unable to do your job due to an illness, injury or accident. Choose a percentage of your income that you'd like to be covered for as well as the term and you'll be covered from day one. More on Income Protection
Relevant Life Plan for contractors
RLP is available for contractors owned and paid for by the Limited Company, to cover its employee, you the contractor, premiums are treated as a business expense, subject tour accountant agreeing to this and a few conditions being met, the benefit paid out to a discretionary trust, and distributed as your wishes to the named beneficiaries tax free. More on Relevant Life Plan for Contractors.
Family income benefit
Prefer to leave a regular monthly income for your family rather than a fixed lump sum? Family income benefit is designed to do just that in the event of your death, offering a regular monthly payment rather than one big chunk of cash. This can be much easier to manage and offers longer-term security. More on Family Income Benefit