Gregor Sked, Senior Protection Development and Technical Manager, Royal London

Being self-employed offers freedom, flexibility, and control over your own future, but it also means that you are the business. If illness or injury prevents you from working, there’ s no employer to fall back on. There’ s no statutory sick pay, leaving little option other than claiming for Employment and Support Allowance( ESA).

That’ s why income protection is one of the most important forms of insurance for self-employed professionals, yet one of the most overlooked.

Why self-employed professionals need income protection

• No sick pay safety net. Many employees have access to sick pay schemes as part of their employment contract. Selfemployed people don’ t. If your self-employed clients can’ t work, their income usually stops immediately. For many, a few weeks without income can have a significant impact, and several months could be financially devastating.

• Limited state benefits. Statutory benefits such as Employment and Support Allowance( ESA) are meanstested, modest in amount, and could be slow to access. They’ re unlikely to be enough to cover basic living expenses, especially if clients have a mortgage or dependants.

• Ongoing business costs. Many self-employed individuals face ongoing business costs even when they’ re unable to work, such as rent, equipment leases, and vehicle leases. Without income protection, those costs must still be paid, eating into savings or creating debt.

• Flexibility and control. A welldesigned income protection policy provides regular monthly payments if they’ re too ill or injured to work. These payments can be tailored to their personal

and business situation, helping your self-employed clients maintain financial stability until they’ re ready to return to work.

Understanding income protection Income protection is designed to pay out a monthly benefit to replace a portion of your client’ s lost income if they’ re unable to work due to illness or injury.

Most providers will offer cover up to 50 – 65 % of the client’ s regular income( before tax). The reason for not covering the entire lost income is to strike the balance between replacing earnings and maintaining an incentive to return to work.

Before the policy starts paying, it’ s necessary for a period of time to elapse, known as the deferred period, this is often 4, 8, 13, 26, or 52 weeks. Shorter periods can mean higher premiums, but faster payouts.

When setting up an income protection policy, the benefit term is how long payments will last, typically 1, 2, or 5 years, or until their chosen retirement age( such as 65 or 68).

Income protection for sole traders

If you have clients who are sole traders, their insurable income is typically their net profit before tax. Some insurers also include ongoing fixed costs that would continue if your client was unable to work.

Since there’ s no company structure, policies must be owned personally, and premiums are paid from the client’ s after-tax income. Benefits are paid directly to the client.

16 | PROTECTION ADVISER | AUTUMN 2025