Contractor Insurance product options
24th February 2010
This month our Financial Services partner, Contractor Financials, takes a look at the Contractor insurance options available. Here is what they have to say….
Too many contractors pay for insurance products such as unemployment cover that will never pay out; here we take a look at the good, the bad and the ugly of contractor insurance...
The Good
Whilst contracting you enjoy many positives from a freelancing lifestyle, your income is dependent on you being fit and able to get into work tomorrow. As such you risk losing money from the very first day that you can no longer get to your client’s site. Income protection can provide an essential safety net if you are unable to work due to illness or injury as it pays a tax-free monthly income to protect your current lifestyle, giving you the time to recuperate free from financial stress.
If your condition or injury is more serious, you may need changes made to your house or car in order to aid mobility and may even need to employ a carer. Income protection can offer you the opportunity to cover any of these expenses and it is possible to protect up to 75% of your income. This can give you the peace of mind to make the most of your life after an accident or illness without the financial pressures that would otherwise impact.
To help keep costs down you have the option to defer payments (i.e. if you have savings to cover a short term illness such as a sporting injury) or you can opt for a policy that will pay out on the very first day of any illness so that you can keep savings intact for their intended purpose. This flexibility means that you can tailor your premiums to an amount that you know you can afford and you have the option to alter you policy should your financial circumstances change.
The Bad
Another product popular with Contractors is an ASU (accident, sickness and unemployment) policy because they are often cheaper than a full blown Income Protection product. However, these policies offer only short term protection and this is why they seem to offer a cheaper premium.
Many of the policies available via the High Street banks pay out based solely on a permanent salary and won’t be suited to your income as a Freelancer. It is vital that you find an insurance provider that understands your unique circumstances and offers a policy to suit your employment status and lifestyle.
This is one of the areas of financial planning where cost should not necessarily be the deciding factor when you choose a provider. It doesn't make financial sense to try and save a little by picking an insurer that might deter or reduce claims so ignore the sales patter and ask for the statistics.
The Ugly
Finally, the worst of all Contractor insurance is the spectre of Unemployment cover. If you have this cover already then please make sure that you read the small print as it is invariably unsuitable for your Contractor status.
It can be difficult to prove that Contractors are unemployed. Many policies state in the terms and conditions that for your contract to be valid as income verification it must be in place for a minimum term of 12 months. These policy terms also stipulate that contracts must have been renewed at least once.
Even in the unlikely event that you except yearly contracts and have been with that one client long enough for a renewal to kick in, many schemes go on to insist that you must have at least 6 months remaining on your contract when you are given notice of its cancellation. It is almost inevitable that, having paid out for costly premiums over a lengthy term, your contract is terminated with 5 and a half months left to run and the insurance is null and void.
Help is at hand
If you are concerned that your current insurance does not offer the level of protection that you need, or are looking to take out a new insurance policy to cover yourself against the loss of income that may result from an accident or illness then contact ContractorFinancials and speak to an experienced Adviser who will be able to find the right policy to suit your requirements.
For more information call now on 0845 062 8888 or fill out our contact form by clicking here
