Income protection and insurance for the self-employed

General guidance, not a personal recommendation. Lender criteria, insurance terms and costs depend on the product and your circumstances. Numerical examples are illustrations unless expressly identified as an individual quote. Check current terms with your adviser and tax or legal points with the relevant specialist.

If you are self-employed, you do not have an employer's sick-pay package and cannot claim Statutory Sick Pay (SSP) for that self-employment. For eligible employees, from 6 April 2026 SSP is £123.25 a week or 80% of average weekly earnings, whichever is lower, with relevant transitional rules. A self-employed person may qualify for contributory New Style Employment and Support Allowance if the health and National Insurance conditions are met. It is not means-tested in the same way as Universal Credit: a partner's earnings and savings do not determine New Style ESA entitlement, although some other income can affect payments. Check official benefit guidance and your circumstances.

Protection insurance (life, income, critical illness) is therefore more important for self-employed people than for employees, not less. Yet many self-employed people have none at all, partly because of myths about cost and eligibility. This guide explains what works, what doesn't, and what you should realistically have in place.

What to put in place first

1. Income protection

The single most important cover for a self-employed person. Pays a monthly replacement income (typically 50-65% of earnings) if you can't work due to illness or injury, until you can return, retire, or the policy ends. Premium £30-£60/month for most healthy applicants.

2. Life cover

If you have dependants. Pays out a tax-free lump sum (or monthly income via Family Income Benefit) if you die. Cheap: £10-£20/month for £200k cover over 25 years for most healthy 30-40-year-olds.

3. Critical illness cover

Pays a lump sum if diagnosed with cancer, heart attack, stroke, multiple sclerosis or other specified conditions. Typically £40-£80/month for £100k cover, more at older ages. Often combined with life cover.

4. Private medical insurance

Optional but increasingly valuable. NHS waiting times for non-urgent conditions are long; private healthcare gets you treated faster. £100-£250/month depending on level of cover and excess.

Income protection for self-employed: the specifics

Self-employed income protection differs from employee cover in a few important ways:

• Net profit basis. Cover is based on net profit from self-assessment or company accounts, typically averaged over the last 1-3 years. Can include dividends and salary for limited company directors.
• Deferred period. How long you wait before payment starts (4, 8, 13, 26, 52 weeks). Longer deferred = cheaper. Choose based on how long you can survive without income, usually 13 or 26 weeks for self-employed people with 3-6 months savings.
• Incapacity definition. Own-occupation and other definitions assess inability to work differently. Check which applies to your occupation and policy, with any exclusions or restrictions, before choosing cover.
• Benefit period. A limited benefit period and cover potentially lasting to the policy end date provide different levels of protection. Any payment remains subject to the policy definition, exclusions, deferred period, benefit limits and claim conditions. Compare these against your needs and budget.
• Limited company options. Relevant life and executive income protection are different products with different ownership, benefit and tax rules. Ask an adviser about suitable cover and an accountant to confirm any premium deduction, benefit-in-kind and claim tax treatment for the particular arrangement.

A self-employed income-protection review needs evidence of insurable earnings, an affordable premium, an appropriate deferred period and a clear benefit period. Salary, dividends and trading profits are treated according to the insurer's rules. An adviser should obtain an individual quote and explain the actual claim conditions; a generic occupation and income do not establish a premium or guaranteed benefit.