Income protection insurance for contractors
Whilst permanent employees have the benefit of at least three months pay in the event of an accident or long term sickness, as a contractor you are exposed to financial loss the minute you are unable to work. However, there are ways you can protect yourself against the financial hardship this can cause. One method of preserving your current standard of living is to pay a monthly sum towards income protection insurance, which ensures that, if the worst should happen and you are unable to work for a prolonged period of time, you still receive a proportion of your income.
When buying income protection insurance as a contractor, here are four important factors to remember:
The higher proportion of your income you wish to protect, the more your monthly premiums will cost. Try to be realistic when calculating the figure you will need. Although there are certain luxuries you can live without, essentials like a car will still need to be paid for. You may also need extra help around the home or costly adaptations to your existing property. The last thing you’ll want to worry about during such a difficult time is money, so make sure you have protection in place.
Choose a reputable provider
Before committing to a particular provider, do your homework and check the insurer has a good track record of meeting past claims. Delays in making payments can be extremely frustrating, and worse still, trying to avoid paying a claim without a legitimate reason is simply unfair. With a product as important as income protection insurance, it does not always pay to choose the cheapest quote; if you have to pay a little more for cover with a company you know to be reputable, this may be worth your while.
Check the policy terms
As a contractor, it is essential to check you receive the benefit of the policy if you are unable to carry out your current occupation, rather than any occupation. Bearing in mind your skill level and current salary, if this term is not included, you could find the insurer refuses to pay your claim if you are still capable of performing a more menial role. This is an area contractors sometimes overlook, and is often the reason some insurers provide particularly competitive quotes.
Inflation proof your income
In the event of a longer term claim, it is essential you protect your income against the rising impact of inflation. Although €2000 as month might be enough to provide you with the financial protection you need for the next year, what about in 10 years time when the spending power of this €2000 has greatly decreased? Income protection insurance can escalate year on year to account for inflation, so make sure this figure is high enough to provide you with the protection you’ll need in the future.