For the most part, people would insure their car and other assets without any second thoughts. Even when planning a trip, insurance plays a big part. However, when a person goes to work every day, income protection insurance seems to be the last thing to cross their minds. The general thought is as long as you have a job there’s nothing to worry about – a very wrong notion.

Although you don’t want any unfortunate event to happen, reality would dictate that anything can happen in the most unexpected times. And with the unpredictability of the economy, there is also a possibility that the job you have right now might be gone tomorrow. This risk is much higher for a contractor knowing the nature of their job which is ‘no work, no pay’.

It is a reality that most of us are afflicted by common ailments, like flu and colds, every now and then. You may take a day or a couple of days off from work which would not really impact your salary. But what would happen if you suddenly found yourself without work over a long period of time because of an acute illness or injury? How would you able to support your family, pay the mortgage, and cover medical expenses?

For the most part, people would insure their car and other assets without any second thoughts. Even when planning a trip, insurance plays a big part. However, when a person goes to work every day, income protection insurance seems to be the last thing to cross their minds. The general thought is as long as you have a job there’s nothing to worry about – a very wrong notion.

Although you don’t want any unfortunate event to happen, reality would dictate that anything can happen in the most unexpected times. And with the unpredictability of the economy, there is also a possibility that the job you have right now might be gone tomorrow. This risk is much higher for a contractor knowing the nature of their job which is ‘no work, no pay’.

It is a reality that most of us are afflicted by common ailments, like flu and colds, every now and then. You may take a day or a couple of days off from work which would not really impact your salary. But what would happen if you suddenly found yourself without work over a long period of time because of an acute illness or injury? How would you able to support your family, pay the mortgage, and cover medical expenses?

Income protection is the most logical step to ensure that whatever happens, there is some sort of a protective net to catch you. Having income protection guarantees that you will get assistance even in the most difficult times.

Importance of Income Protection for Contractors

Contractors almost enjoy the same benefits as the full-time employees except for one thing – when they get injured or sick, there is no guaranteed payment. As a contractor, you want to safeguard yourself and your income from any financial loss caused by a severe injury or illness. This is where income protection for contractors comes in.

If you are a contractor, and you are seeking some ways how to lessen the impact of any financial loss during an illness or injury, income protection insurance is the solution for that. By setting aside a certain amount of money every month for income protection, you have a more secure future ahead of you.
For one, income protection can cover 75% of your gross annual income in the event of an illness or injury. If this percentage may not seem to be like a big number for you, it is fair enough than go for zero. Seventy-five percent can give you enough time out from any financial burden, such as medical expenses. It could even provide a stream of steady income for you while recuperating.

Second, you can have yourself covered until the retirement age of 65. It should be noted, though, that this will depend on the type of coverage you acquired.

Income protection for contractors could be classified in two – one which protects your business against any liabilities, and the other one to provide coverage for you and your family. Some of the coverage available is in the list below.

• Professional Indemnity Insurance – This is to cover any claims made against your services or your company. This includes paying for the cost of defending claims made against you and any damages you have to pay. Also included in the cover might be violation of intellectual rights, unpremeditated breach of contract, defamation, loss and damage to client’s documents and data.
• Permanent Health Insurance – This provides a steady stream of monthly income for you in the event of sickness or injury. The deferred period is between a day and a year. It should be noted that the longer your waiting period is, the lower premium you pay.
• Critical Illness Cover – This is a lump sum you receive in case of severe illness or injury. This applies to the early diagnosis of high-risk illnesses, such as heart attacks or cancer. By getting a lump sum, you have a ready fund for any medical expenses that may arise.
• Life Coverage – This is the amount of money your family gets in the event of your death. This would ensure that you would leave something for your family even when you’re gone.

Factors Affecting Income Protection for Contractors

Choosing the right policy for you is just the beginning. There are other factors that need to be considered when getting income protection. These factors would greatly affect the policy you get as a contractor.

The first thing on the list is to determine the term and amount of the coverage. Make sure that the policy you choose could cover you until the retirement age. In addition, have a realistic approach how much coverage you want. Although income protection can cover up to 75% of your annual gross income, there are things that are not needed and can be cut off which could save you a lot of money. Make sure also that your financial adviser knows the nature of your income. Will the policy only pay based on the salary or are dividends included?

Next, choose how long the deferred or waiting period will be. The longer you wait for the policy to take effect after the initial pay-out, the cheaper it will be.

And lastly, be sure that the insurance provider has a proven track record on meeting claims. Any delays or impediments on claims mean further headaches for you. And being a contractor, this is the farthest thing you want to happen to you.

Income protection is not something you should overlook, especially if you are a contractor. By having income protection you protect yourself, your family, and your business.Income protection is the most logical step to ensure that whatever happens, there is some sort of a protective net to catch you. Having income protection guarantees that you will get assistance even in the most difficult times.