When you’re employed you can usually enjoy the peace of mind and financial security that benefits like sick pay or death in service provide. When you work for yourself as a Contractor and Director of your limited company however it falls on you to ensure you and your loved ones are financially protected.
There are helpful questions you can ask yourself to establish if you are financially protected in the way you and your family need to be. These include: what would happen to your family if something happened to you? If you fall ill, will you have to use your savings to meet your financial requirements like bills and mortgage payments? If your answers to these are inconclusive read on to learn how you can protect yourself as a Contractor.
Income Protection insurance is a long-term insurance policy designed to help you if you can’t work or earn because you’re ill or injured. It ensures that you continue to receive a regular income (usually around 50-70% of how much you pay yourself) until are able to return to work, retire, pass away or your your policy term ends – whichever comes first. It is important to note that Income Protection will not cover you if you are in between contracts. It’s purely to cover you due to an illness or injury that prevents you from working and, in this way, can be seen as a substitute for sick pay.
Life Insurance assures your family receive a payout in the event of your death. This could be used to cover bills, your family’s day to day lifestyle and child rearing costs or even pay off the remainder of the mortgage. As a director of a limited company, you could save tax by paying for your Life Insurance through your limited company as a business expense. This is known as Relevant Life Insurance and it can save you 19% corporation tax. Though it is paid as a business expense, it’s not seen as a benefit it kind so doesn’t need to be recorded on P11D.
Did you know that 1 in 2 people born after 1960 will be diagnosed with a form of cancer during their lifetime? It’s scary to think about but it puts into perspective how important it is to have the right insurance in place in the event of a critical illness. Critical Illness cover pays a tax-free lump sum if you’re diagnosed with a critical illness during the policy term. The payout can go towards improvements in the home to help you adjust, such as a ramp or stair lift, as well as paying off the mortgage if you can no longer work and generate the income you previously relied on.
Private Health Care
When you’re a Consultant or company Director, your time is money. Quite literally. If you’re unable to work, your earnings will stop. As you don’t receive the same sick pay benefits as ‘regular’ employees, getting back on your feet as quickly as possible will be a priority. However, the long queues at standard NHS service could slow you down. With Brexit and the future of the NHS unclear, Private Health Care is one way you can remain confident that you will receive the best care, efficiently, so you can get back to work and earning as soon as possible.
This blog is contributed by our trusted partner Broadbench, an expert in contractor mortgage and insurance.