Small business owners, insurance policies taken out on behalf of your business only protect your business – not you. Don’t let personal protection be an afterthought.
Often, a small business owner’s top priority is to look after their business first and themselves second. Unfortunately, this naive prioritisation of business over self will inevitably lead to disaster if you unexpectedly become seriously ill or injured. If you’re out of work for a prolonged period of time- though your business is protected- who will pay your bills and take care of your family?
What is income protection?
Essentially, income protection is designed to help replace your income, typically 50-70% of your income, if you’re out of work. This ensures that most, if not all, your essential outgoing expenses are covered during this period.
Your income is calculated based on your share of the business’ profits that were generated before tax. The size of your mortgage and any loans you have taken out will also determine the amount of cover that you’ll need. Though, note that you can negotiate the terms of your cover with your provider in order to suit your specific circumstances.
While you can receive financial support from the government through Employment and Support Allowance, there is no guarantee that you will qualify for this support. Not only that, but even if you do qualify, you will receive considerably less money than if you were to claim on an Income Protection policy. So, income protection is definitely a safety net worth considering to potentially avoid falling on hard times.
Do I really need income protection insurance?
Before deciding whether or not to take out income protection insurance, there are a few things to take into consideration.
Firstly, if you already have an insurance policy or mortgage that covers serious illness or injury, it may not be a good option to take out income protection. Also, if you have considerable savings that could cover your bills and provide for your family while you’re out of work, income protection may not be necessary- or at least not right away.
You’ll need to consider how long your savings will last you and your loved ones. You also need to consider what would happen if your condition worsens or continues for longer than expected. It’s a good idea to prepare for the worst. In a worst case scenario, you might need to factor in the possibility of an unexpected emergency that could use up all of your savings.
Once you have come to a decision, you can arrange for your payout to come at a time that will be most beneficial to you and those closest to you. Moreover, when taking out your policy, you will agree to the range of injuries and illnesses you wish for your police to cover. Income protection insurance is flexible and tailored to suit your specific needs and wishes.
What does income protection cover?
Income protection covers you against most conditions and illnesses that leave you out of work, such as stress, back pain, cancer and heart disease. However, it does not always cover conditions known about before deciding to take out your policy.
It also doesn’t cover alcohol or drug misuse, criminal activity, redundancy or surgery considered to be cosmetic rather than medical.
Regardless of whether you have a family to look after or if you’re the sole person dependent on your income, income protection insurance is a good option for all small business owners. Making sure that you are still able to make payments if you are ever unable to work should be the next big thing to tackle on your agenda.