As a small business owner, your top priority will often be to look after your business first and yourself second. Yes, it’s important to make sure that your business thrives and runs smoothly. But what would you do if you were out of work for a long period of time due to serious illness or injury? You probably have insurance to protect your business, but how will you continue to bring home the bacon and pay your bills? How will you take care of your family?
Personal protection should not be an afterthought. After all, insurance policies taken out on behalf of your business only protect your business and not you.
Getting income protection is simply about making sure that your finances are protected and that you can continue to provide for your family. Surely that’s got to be worth a second thought? Read on to find out what income protection is and why it’s beneficial for small business owners.
What is income protection?
Simply put, income protection is a protection policy designed to replace between 50-70% of your income should you become seriously sick or injured and are unable to work. That way, covering your essential outgoing expenses during this period will be one less thing you have to worry about.
The amount of cover you need will be based on:
- Your share of the business’ profits generated before tax
- The size of your mortgage
- Any other loans you have taken out
- The range of conditions you would like your policy to cover
Note that you may be eligible for financial support from the government through Employment and Support Allowance. However, there is no guarantee that you will qualify for such support. Plus, the amount you receive may not be enough to keep life ticking over, as this will usually be considerably less than income protection. With this in mind, taking out income protection insurance is definitely something that all small business owners should seriously consider.
Is income protection worth it?
Truth is, income protection is generally a great option for most small business owners. However, depending on your specific circumstances, it may not actually be worth it.
For example, if you have a mortgage or insurance policy that already covers serious illness or injury, you probably don’t require income protection. On top of that, you may not need income protection insurance if you have savings that could cover your bills whilst you’re off work due to a serious illness or injury – or at least not immediately.
It’s wise to think about how long your savings will likely keep you and your family afloat, as well as how you would cover your expenses if your condition worsens or continues for longer than expected. After all, life is always better with a plan. Think of getting income protection as betting against the worst case scenario. If the unthinkable happens, such as an unexpected emergency, then you won’t have to rely on your savings.
Once you’ve determined the level of cover you will likely need, the next thing you need to consider is when you will need the payout. It’s important to arrange for your payout to come when it will be most beneficial to you and your loved ones.
What does income protection insurance cover?
When you purchase your policy, you will also need to decide the range of injuries and illnesses you would like your policy to cover.
Most income protection policies will cover you against common conditions that leave people out of work, such as cancer, heart disease, stress and back pain.
Bear in mind that income protection will not cover pre-existing conditions. What’s more, income protection will not cover conditions related to alcohol or drug misuse or criminal activity. It will also not cover redundancy or cosmetic surgery-related conditions.
Even if you’re the sole person dependent on your income, every small business owner should think about getting income protection insurance. Making sure that you are able to keep life ticking over should you fall seriously ill or get injured should be your next plan of action.