Once consequence of becoming self employed is that you may lose lots of insurance benefits that you took for granted in your PAYE job. For example, you may lose sick pay and ‘death in service’ life cover when you leave your paid job and set up business on your own.
So, it’s vital that you consider insuring yourself when you become self employed. Our guide looks at four of the most important insurances you should look at.
If you have any debts or if you have a family, life cover should be a top priority. Experts normally recommend that you have sufficient life cover to pay off any debts (mortgages, loans, credit cards) in the event of your death and you may also want to leave a lump sum to your family.
Michael Rothman from financial advisors Best Advice, says: “’If you have a family or dependents it is important to make arrangements to ensure debts could be paid if something happened to you as the main breadwinner.”
When you are in a PAYE job you will normally benefit from sick pay if you are unable to work for an extended period due to ill health. However, as a self employed person you will often find that if you can’t work due to illness your income will soon dry up.
Roderic Rennison, financial planning director of financial adviser Charcol, advises making income protection a priority. He told the Guardian: “You are not likely to need life cover in your twenties and thirties but you may well need help if you are unable to work. Income protection should be factored in as part of your business plan.”
Permanent Health Insurance (PHI) is one of the most common types of insurance used for this purpose. You can make the cost of PHI cheaper by increasing the excess period – the amount of time you have to be off work through accident or illness before you make a claim. However you’ll need to make sure you have sufficient cash or savings to cover this initial 3-6 month period.
Buildings and contents insurance
Many standard home buildings and contents policies won’t cover you if you run your
business from home.
For example, your home contents policy may not pay out for flood damage or theft of business stock if you keep it at home. Similarly, any business equipment such as the IT in your home office may not be protected under a traditional home insurance policy.
Dedicated ‘working from home’ insurance can help you ensure your business is protected.
Public/employee liability insurance
Peter Smith from financial advisors Inter-Alliance told the Guardian: “In some professions you need indemnity cover before you start working. If you are a scaffolder, builder or IT contractor you need to ensure that you can’t be sued by the people you are going to work for, or that if you injure someone you have the right cover in place.”
Public liability insurance makes sure you are covered for damage to third parties or their property from the operations of your business. And, if you employ staff, employer’s liability insurance covers you against any claims made by your employees for accidents etc at work.