Ground breaking Income Protection based on contract rate alone! Is yours still fit for purpose?
Over the past 15 years our advisers have been diligently ensuring that our income protection recommendations are tailored to the unique requirements of Contractors but until now, the policies have always had to be based on salary and dividends alone which often doesn’t reflect the full extent of your earnings…
However, our dedicated protection team have been working hard over the past year 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 was previously possible and could make a substantial difference to your lifestyle if you were unable to work due to accident or illness.
Income Protection or Permanent Health Insurance (PHI) will pay a tax-free monthly income in the event that an accident or illness prevents you from working. It can even pay you an income all the way through to retirement if your condition is more serious.
These policies will pay after an initial waiting period of your choice (known as a ‘deferment period’), which is normally between 4 weeks and a year. The longer this deferment period, the lower your premiums are likely to be. However, if you have savings or credit cards that can cover your outgoings in the short-term then it could be beneficial to defer your benefits for 3-6 months in order to lower your monthly premium. You would do this safe in the knowledge that you are due benefits at the end of the waiting period.
How much of my income should I protect?
It is important to be realistic about the amount of money you would require if the worst should happen and you can no longer work. Whilst you may be able to cut back on some areas, there will be other luxuries that will become essentials if you are ill over a long period of time. Income protection can offer you the opportunity to cover any of these expenses and can give you the peace of mind that you can make the most of your life after an accident or illness, all without the financial hassles that would otherwise put at risk your current lifestyle and could even cost you your home.
A traditional income protection policy allows you to protect up to 55% of your gross income but this can be quite limiting for Contractors who may draw a low salary and dividends to minimise their tax take. Our new, specially negotiated 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 and could therefore protect up to £4,200 per month with our Contractor income protection policy.
What else do I need to know about income protection for Contractors?
The world of protection can be a minefield for Contractors as many of the policies available on the high street and from price comparison sites are unsuitable for your unique working status.
You obviously need complete confidence that the policy you choose and start paying for is truly fit for purpose. 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 benefit and for 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.
We also ensure that your cover is inflation proofed so that you are covered for the same amount of spending power in twenty years time as you would be today. 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 until retirement.
The good news is that our award winning protection adviser Samantha Foster-Hebberd has done the leg work for you and has negotiated hard to ensure that the contract based income protection that we now offer will cover you on an own occupation and inflation proofed basis.
For more information on contract based income protection or to review an existing policy to ensure that it is tailored to your unique needs as a contractor and definitely covers you for a sufficient enough amount of benefits, contact Samantha on 0845 062 8888 or email us at protection@contractorfinancials.com.
