Posted on January 29, 2013

With flu season in full swing and the roads getting slippery under foot, we are all too aware of the dangers facing Contractors if you fall ill or are injured and are unable to work. We have lost count of the number of cases where Sherwin Currid clients have suffered a loss of income because they were too ill to get on site and if you don’t have any savings to fall back on, it can have a significant impact on your finances.

We have enlisted the help of ContractorFinancials to offer Sherwin Currid clients income protection cover. The advisers are always in-undated with Freelancers through the winter, looking to protect their income and this year looks set to follow suit. They can help you guard against the financial impact of seasonal bugs, accidents on slippery roads and against injury on the ski-slopes without breaking the bank.

With income protection you can safeguard against the loss of earnings that you would suffer if you were too ill to work and with policies that can cover you from day one of your illness or injury, you can rest assured that you won’t need to rely on your savings. You can insure up to 66% of your income with this policy so you can concentrate on recuperating rather than worry about how to pay the bills and because it pays you a monthly income, you won’t need to manage a lump sum.

Income Protection based on Contract rate alone

Until recently, income protection policies have always had to be based on take home pay which often doesn’t reflect the full extent of your earnings. However, the dedicated protection team at ContractorFinancials have worked hard to negotiate with providers to bring you the first contract based income protection product. This innovative insurance will allow Contractors to insure far more income than in previous years and could make a substantial difference to your lifestyle if you were unable to work due to accident or illness.

A traditional income protection policy allows you to protect up to 75% of your net income but this can be quite limiting for Contractors taking a low salary to minimise their tax take. Contract based income protection allows you to cover up to 50% of your gross contract income instead. This means that a Contractor with a rate of £60 per hour working 35 hours per week could earn a gross yearly contract rate of £100,800 based on 48 weeks work. This Contractor could therefore protect up to £4,200 per month with a Contractor income protection policy.

Executive Income Protection

There are a variety of policies available to Contractors but one which has proven particularly popular with Ltd company owners is executive cover. You can cover up to 80% of your income with an executive plan and because it is tax efficiently arranged through your company, the premiums are taken before you take your salary or dividends.

It is worth bearing in mind however, that because the policy is in your company name, any claim would be paid directly to your company. You would then need to withdraw funds in your usual manner i.e. salary or dividends which may leave them subject to tax deductions at this point.

Choose your cover wisely

The devil is often in the detail on this type of cover and with a lot of small print to read on any insurance policy Contractors could find themselves under insured or with a provider that will not cover your specific circumstances. It’s therefore vital that any protection that you put in place reflects your unique employment status etc.

An example of where policies prove unsuitable is where dividends are not covered. As a Contractor working via a limited company, you will be likely to draw a low salary with the bulk of income taken via dividends however some plans will only cover a multiple of salary alone leaving you largely unprotected in the event of a claim. The key is to only approach those insurers who specifically state that they are happy to cover dividends etc, even if split with a spouse.

You need to make sure that the policy you choose will cover you for your own occupation so you don’t end up stacking shelves in a supermarket when the insurer refuses to pay the full term of your illness. Own occupation cover will continue to pay out until you are well enough to return to your original position or the equivalent role which is vital for a Contractor.

You should also ensure that your cover is inflation proofed so that you are covered for the same amount in twenty years time as you would be tomorrow. Over time, inflation would have a huge impact on the income you would receive in the event of a claim so this is a priority for Contractors looking to protect their income for a long period e.g. until retirement.

Help is at hand

The advisers at ContractorFinancials specialise in offering comprehensive insurance products to Contractors looking to replace the sick pay and death in service benefits that you left behind with your previous employer. The award winning team will work with you every step of the way, from arranging the right cover for your individual circumstances, to helping you make a claim if you fall ill.

For detailed information on your circumstances


call: 0845 062 8888