Introduction
Income protection insurance is something that many people don’t think about when it comes to their finances. However, it’s an essential part of any contractor’s life. In this article we’ll look at what income protection insurance is and how it can help you protect yourself and your family financially in the event of illness or injury.
What is income protection for Contractors and how does it work?
Income protection insurance is a type of insurance that protects your income if you can’t work due to sickness or injury. This type of policy will pay out a percentage of your income, usually 60-80% of your income, if you are unable to work due to illness or injury.
In general, however, it’s not as simple as just having an accident at work and then getting paid out by the company that provides this kind of coverage. There are different types of policies available and each one has different requirements for what needs to happen before any payments kick in
A quick note on tax
Income protection insurance is not tax-deductible, so it’s important to know that your income protection policy will not take the tax out of your earnings. The good news is that you don’t have to pay any tax on your earnings even if you’re covered by a policy. You’ll still be responsible for paying taxes based on all of your income, and as long as it’s less than the amount of income protection coverage that would have been taken out of your paycheck if there were no insurance available (let’s say $10k), then there will be no impact on what happens with those funds when they come up in case something happens.
In addition to taking care of themselves financially in case something bad happens (like losing their job), contractors also need protection against unexpected medical expenses caused by injuries sustained during work activities such as car accidents while commuting between jobs sites or home repairs needed because of damage done by another contractor who doesn’t have insurance himself!
What level of cover do you need?
The level of cover you need depends on your income, but it’s always better to have more than you need. If you’re self-employed, then you’ll need to get cover for yourself and your family.
If your business has been trading for at least 12 months then there are two types of contracts available:
- Standalone Policy – this is designed for contractors who are not currently insured through a company or association; it provides comprehensive protection against personal injury claims up to a maximum limit per policy year (typically £2 million). It’s also important that this policy has been obtained from an approved broker so that all the usual terms and conditions apply too!
- Association Policy – designed for associations with members who want extra protection against personal injury claims beyond what is provided by their normal policy(s).
How much cover do you need?
The amount of cover you need will depend on your circumstances. If you are working as an independent contractor, then it’s likely that you will be self-employed and therefore not eligible for group health cover under your employer’s scheme. This means that if anything goes wrong with your health while on the job (such as injury or sickness), then it will be up to you to fund any treatment costs out of pocket.
If this sounds like something that might happen again in the future – don’t worry! It’s easy enough to get cover through one of our recommended insurers who have access through their networks and can provide a full range of policies including personal injury protection (PIP) which may be worth looking into if there are problems down the line.”
Why would you need income protection as a contractor?
You are a contractor and you have a choice to make. You can be self-employed, or you can work for an employer who provides all the benefits of employment, including sick leave and holidays.
If you’re starting out as a contractor and need some income protection insurance if things go wrong with your business then it’s worth considering this option so that when something happens that impacts on your ability to earn money from your service contract then there will be some income coming in from somewhere else.
Income protection insurance is absolutely essential for any contractor.
Contractors are more likely to be injured or sick, made redundant and experience a change in their family circumstances. They may also have a change in their health that impacts their ability to work.
Income protection insurance is absolutely essential for any contractor.
Conclusion
If you’re a contractor, income protection insurance for contractors is an absolute must. You need it because the amount of time you spend at work can be unpredictable, with no guarantee that you will get paid for any hours worked. Even if your employer pays all or part of your salary, it doesn’t mean they will continue to do so into the future. This means that if something goes wrong with your health in between those payments then there’s little chance of taking care of yourself.
