As a self-employed individual, you're living the dream, right? You set your own hours, choose your projects, and are your own boss. But with great freedom comes great responsibility. While you relish the flexibility and control, it's crucial not to overlook the safety nets that traditional employees often take for granted—namely, insurance. So, let’s dive into why life, critical illness, and income protection insurance are not just nice-to-haves but essential pillars for your financial security.

When you work for yourself, there’s no sick pay, no employer-sponsored life insurance, and no one to cover your income if you’re unable to work. According to the Office for National Statistics (ONS), the number of self-employed workers in the UK was around 4.3 million in 2024. That’s a significant portion of the workforce navigating these challenges. With this in mind, let’s break down the types of insurance you should consider and why.

Life insurance is a fundamental part of a robust financial plan, especially if you have dependents. Imagine the unthinkable happens. Would your family be able to manage without your income? Life insurance provides a lump sum to your beneficiaries if you pass away, ensuring they can cover living expenses, mortgage payments, or education costs.

The cost factor

Life insurance can be surprisingly affordable. For example, a 45-year-old non-smoker can expect to pay about £37.36 per month for £100,000 of coverage over 15 years. Of course, rates vary based on age, health, and the level of coverage, but the peace of mind is priceless.

No one likes to think about falling seriously ill, but it's a risk we all face. Critical illness insurance pays out a lump sum if you're diagnosed with a severe illness listed in your policy. This can include cancer, heart attack, stroke, and other life-altering conditions.

Why it’s vital

For self-employed individuals, a critical illness could mean months or even years of not being able to work. The financial strain can be overwhelming. With a critical illness policy, you have a financial buffer to cover medical expenses, adapt your home, or simply to maintain your standard of living during a tough period.

What’s the cost?

Costs for critical illness cover vary widely, depending on factors like age, health, and the amount of coverage. For a 45-year-old non-smoker, premiums might be around £60 per month for £100,000 of cover. This monthly expense can provide significant relief if the worst happens. 

Income protection insurance is arguably the most critical type of insurance for the self-employed. This policy provides a regular income if you're unable to work due to illness or injury, typically covering up to 70% of your earnings.

The importance

Without the safety net of employer-provided sick pay, a prolonged period without income can be financially devastating. Income protection insurance steps in to fill that gap, ensuring you can pay your bills and keep your business afloat while you recover.

Understanding the costs

Premiums for income protection insurance depend on your age, occupation, health, and the deferment period (the time between making a claim and when payments start). For a 45-year-old non-smoker, premiums might range from £60-£120 per month for a policy that pays out £1,500 a month after a three-month deferment period.

Choosing the right insurance can be overwhelming, but it’s a crucial part of protecting your livelihood and your loved ones. Here are a few tips to get you started:

1. Assess your needs: Consider your financial commitments, dependents, and how long you could manage without an income.
2. Shop around: Insurance costs can vary significantly between providers. It’s worth comparing quotes and coverage options.
3. Seek professional advice: As the independent financial advice partner for IPSE, Chase de Vere can provide tailored advice to help you find the best policies for your circumstances.

Let’s consider two self-employed individuals, John and Sarah.

John’s Story

John, a freelance graphic designer, decided to invest in life, critical illness, and income protection insurance. Last year, he was diagnosed with a serious illness and couldn’t work for several months. Thanks to his critical illness policy, he received a lump sum that covered his medical expenses and allowed him to focus on recovery without financial stress. His income protection insurance kicked in after three months, ensuring he could pay his bills until he was able to work again.

Sarah’s Story

Sarah, a self-employed consultant, thought she didn’t need insurance. When she suffered a major injury, she was unable to work for over a year. Without any form of income protection, she struggled to pay her bills and had to deplete her savings. Her experience highlights the potential financial disaster of not having the right insurance in place.

The IPSE advantage

If John and Sarah were IPSE members, they could have benefited from a lump sum payout of up to £2,000 if they fell ill or were injured. This is part of the membership benefits offered by IPSE, which provides additional financial support during challenging times. For more details on this benefit, you can visit IPSE's Illness and Injury Cover.

As a self-employed professional, you’ve already taken the bold step of forging your own path. But with that freedom comes the need to protect yourself and your loved ones from life’s uncertainties. Life, critical illness, and income protection insurance are not just expenses—they're investments in your peace of mind and financial stability.

Complimentary initial consultation for IPSE members

As an IPSE member, you have access to specialist independent financial advice from Chase de Vere. Speak to one of our experienced advisers to tailor an insurance plan that meets your needs. Book your initial meeting at our expense and take the first step toward securing your financial future. Click here to schedule your consultation today.

Sources:

1. Life Insurance Costs - Reassured
2. Critical Illness Insurance Costs - MoneySuperMarket
3. Income Protection Insurance Costs - Reassured, iam INSURED