Income protection insurance for the self-employed: why it could be the best protection for your earnings
Working for oneself offers a great deal of freedom, but it also involves taking on risks that an employee does not usually face. One of the most important is what happens when an illness or accident prevents you from continuing to carry out your professional activity.
Whilst personal and professional expenses continue to arrive each month, income can be reduced considerably during a period of sick leave. In this context, having a Sick pay insurance for the self-employed can make the difference between maintaining economic stability or going through a period of great uncertainty.
In this article we explain how this type of insurance works, what cover it offers and why more and more professionals are deciding to protect their income against temporary incapacity.
What is sick pay insurance for the self-employed?
An income protection insurance policy, also known as temporary incapacity insurance or sickness and accident insurance, is designed to compensate for loss of income when the policyholder is unable to work due to illness or an accident.
Depending on the agreed conditions, the insurer pays a daily indemnity while the temporary incapacity lasts, helping to cope with both personal expenses and costs arising from professional activity.
For many self-employed workers, this insurance acts as a top-up to state benefits, which can sometimes prove insufficient to maintain the same level of income.
Why does a sole trader need this protection?
When an employee is on sick leave, they continue to receive a significant part of their salary and, in many cases, the company continues to operate normally.
However, for a self-employed worker the situation is usually very different.
In many sectors, stopping work means stopping invoicing from day one, while expenses continue to exist such as:
- rent of the premises or office;
- finance repayments;
- supplies;
- employee salaries;
- National Insurance contributions;
- taxes and other fixed costs.
A long-term absence can seriously affect the viability of the business if adequate protection is not in place.
What does income protection insurance cover?
Although coverages may vary depending on the company and the policy taken out, this type of insurance usually covers situations such as:
Common illness
When an illness prevents someone from carrying out their professional activity for a given period.
Accident
It includes both accidents that occurred during work and, in many cases, accidents of private life.
Hospitalisation
Some policies offer additional compensation when the sick leave involves hospitalisation or a surgical procedure.
Sickness absence
The main cover consists of the payment of a daily amount for the time the professional remains on sick leave, respecting the limits established in the policy.
Is the social security benefit sufficient?
Many professionals believe that state provision will cover all their financial needs during a period of sick leave.
However, the reality is often different.
The amount a self-employed worker receives depends on various factors, such as their contribution base and the origin of the disability, meaning that in many cases it may be lower than their usual income.
You can consult all the up-to-date information on the temporary incapacity benefit on the official website of the Social Security
For this reason, numerous people decide to complement that protection with insurance that allows them to maintain greater financial stability.
Things worth considering before taking out insurance
Not all sick pay insurance policies offer the same benefits.
Before taking out a policy, it is worth analysing aspects such as:
The daily allowance
It must be enough to cover regular expenses and offset the loss of income.
The franchise period
It is the number of days that must elapse from the start of the sick leave until the payment of the compensation begins.
The maximum duration of the cover
Each policy sets a maximum limit of compensable days for each period of sick leave.
The compensation scales
Some companies use default sick leave duration tables, while others compensate based on the actual medically certified duration.
Having the advice of a specialist broker makes it possible to compare the various options on the market and choose the alternative that best suits each professional activity.
A practical example
Let's imagine a freelance graphic designer who suffers a sports injury and needs to take two months off work.
During that time, studio rent, self-employed social security contributions, software licences, insurance, accountancy fees and the rest of the fixed costs continue to come in.
If they also stop serving their regular customers, their income may drop drastically.
With an adequate sick pay insurance policy, you could receive a daily allowance to help you cope with those expenses while you recover, reducing the financial impact of temporary incapacity.
Protect your income to work with greater peace of mind
Health is one of the most important assets for any self-employed professional. However, nobody is exempt from suffering an illness or an accident that forces them to interrupt their activity for weeks or even months.
Income protection insurance does not prevent that unforeseen event from happening, but it can help to minimise its financial consequences and offer greater peace of mind to both the professional and their family.
At PIB Group Iberia We analyse each client's needs to find the insurance solution that best protects their business and income.
If you want to know what options are available for your specific case, our team can help you compare the different alternatives on offer.
At PIB Group Iberia we have a team of ILT insurance experts ready to advise you personally on choosing the best insurance for you. Contact us at PIB Group Iberia for personalised advice without obligation.
