Sickness insurance for self-employed
Starting your own business and becoming self-employed offers independence like no other career. Selecting your own working hours and having freedom from restrictive routines are just some benefits of self-employment. However, without the safety net provided by an employer, you could struggle to support your business should you become unable to work.
When working under a contract from an employer, you are entitled to a number of employment rights that will protect your position and provide you with an income following sickness, annual leave, and maternity leave. Unfortunately, part of the risk that accompanies self-employment is the lack of income when you become unable to work.
In this article, we will explain why it is essential that self-employed individuals take out insurance to protect them from sickness and injury. Here at Eden Hawk Financial Solutions, we are committed to providing our clients with sensitive financial advice. For further advice, contact our team to discuss your matter in further detail.
What rights do self-employed workers have?
In the eyes of the law, a self-employed individual is not classified as an employee. This means they are not entitled to many of the benefits provided within employment law.
If you are self-employed, you are not entitled to rights such as national minimum wage, paid holidays, or limits on the number of hours you can work. These are standards that are set to prevent the exploitation of employees. However, when working for yourself, these are decisions that you can make yourself. Unfortunately, alongside these employee rights, self-employed individuals are not entitled to statutory sick pay (SSP) if they become ill and unable to work.
When employed, statutory sick pay can provide significant relief for stress associated with being unable to work. SSP becomes payable on the fourth day of being absent from work due to illness. Employers are required to pay a minimum statutory rate of £99.35 per week to any employee that qualifies.
Whilst self-employed individuals are entitled to some fundamental employment rights, this does not cover income protection such as statutory sick pay. This can be a significant detriment to those who cannot afford to miss several days, weeks, or months without generating an income.
What if I become sick whilst self-employed?
As we mentioned above, individuals who work for themselves are not entitled to statutory sick pay. Therefore if they become unable to work, there is no safety net provided by an employer to create financial security.
If you become unable to work, self-employed individuals are eligible to contact Universal Credit. They will require details of your condition, as well as your typical income. You may then be offered a monthly payment to cover the cost of living based on your existing income. Each case is assessed individually and it is not guaranteed that you will receive an income that reflects your typical earnings. Under these circumstances, you may find it difficult to maintain your current outgoings on a reduced income.
What other options are available?
Sickness or injury for an extended period of time can take a toll on your financial welfare. Oftentimes, the support provided by universal credit won’t be enough to cover your mortgage or rent and typical outgoings. The alternative options require some pre-emptive action but they can prove to be invaluable should you come to require a payout.
The most frequently utilised form of insurance used by those in self-employment is an income protection policy. They provide an option to receive a pre-set payment that helps to cover some of the earnings lost following an injury or illness that leaves you unable to work. There are a number of providers offering policies that enable you to choose how much you will receive as a regular monthly payout and whether you want long-term or short-term coverage.
There is also an alternative option if the cost of income protection insurance is too expensive. Critical illness insurance offers a lump sum payout following a diagnosis of a severe illness or disability that leaves you unable to work. The illnesses covered in these policies are often limited as they usually include long-term conditions such as heart attacks, stroke, cancer diagnosis, degenerative diseases, or loss of limbs.
How to make a sickness insurance claim
When setting up an income protection policy, your provider will talk you through each of the ways you can claim on your insurance. Typically you will need to prove a number of factors to your provider before they can release a payout in line with your policy.
They will typically require evidence of your earnings and proof that you are unfit to work. They may also look into your medical history to validate your medical underwriting if this is relevant to your claim. Following this process, if your inability to work aligns with your insurance policy, you will receive your scheduled payments until the end of the policy or after returning to work.
Summary
As a self-employed business owner, it can be stressful knowing that you are liable for any loss of income during a period of illness or injury. There isn’t a significant amount of support available if you do become incapacitated for a long duration. This could cause you and your dependents to suffer financially.
Income protection policies are available to self-employed individuals interested in securing their financial well-being. For a monthly fee, policyholders are eligible to claim a proportion of their current earnings, providing them with an income to stay afloat.
Alternatively, critical illness insurance policies are less expensive but offer a lump sum payout rather than regular payments. These policies are also limited in the types of injuries and illnesses that can be claimed for.
For further guidance on self-employed finances or sickness insurance options, contact Eden Hawk Financial Solutions. Whether you are newly self-employed or have been working for yourself for a number of years, we offer financial advice to enhance and secure your business.