As a contractor you will be enjoying many of the perks of being your own boss, but it is important to avoid the pitfalls that come from leaving full time employment.
If you are unable to work for whatever reason then there is little by way of employee sick pay to rely on and it is important that your family are protected against the loss of income that would arise if you were no longer around to pay the bills. There are various options open to contractors to protect against loss of income as a result of accident, illness or death but it is vital that the policy you choose will cover your freelance status.
Many high street protection policies are restricted to permanent employees and too often we hear horror stories of contractors who have paid insurance premiums for years only to find out that the policy wouldn’t pay out when it really mattered because they weren’t in a permanent role. At ClearSky Wealth Management we specialise in offering independent protection advice tailored to the contractor community so you can rest assured that any policies we recommend will cover your lifestyle.
When you choose to review your protection policies, we will look at the type of cover that you need. For example, critical illness cover which pays out a lump sum on diagnosis, income protection which pays a monthly salary if you are too ill to work or life cover which replaces lost death in service benefits. We will also assess how much you want to protect and for how long as there are various levels of cover depending on your circumstances. Some contractors choose to protect themselves and their family until their children leave home whilst others may decide to cover up to retirement age. It is these factors that will influence the cost of your premiums and the provider that best meets your needs.
Protect your income if you are unable to work
If you are injured or fall ill and are unable to work, then permanent health insurance can help to cover your expenses until you are back on your feet again. A typical plan will pay a tax free monthly income following a certain period of illness such as 3 months and will pay until you recover or reach your retirement age. You can even choose a policy that offers a one day waiting period if you don’t have access to any savings to bridge the gap.
The advisers at ClearSky Wealth Management understand your unique needs as a contractor and will ensure that they take key factors into consideration when advising you on your income protection policy such as the way you are paid, market instability, employment status and whether you work abroad.
When we are reviewing your existing protection we will look at a number of factors such as whether your policy protects short term contract workers and covers both salary and any future dividends in case your employment status changes. It should also cover you for the job that you are doing now so that the insurer cannot say you are fit enough to do a menial role and refuse to pay. Protection premiums should be guaranteed rather than reviewable so that the premium won’t fluctuate with the market conditions and the minimum number of exclusions should apply so that it will pay out what you deserve when you need to make a claim.
Discounted cover for ClearSky clients
Apply for your Private Medical Insurance using ClearSky Wealth Management’s dedicated contacts and there are a whole host of savings that you can make.
Our chosen provider, WPA, has a long history of working with us and has offered a 30% discount to ClearSky clients when taking out a policy through ClearSky Wealth Management.
Additional first year discounts when you take out a new policy
For a limited time only, we can make the first year of your cover even cheaper still. If you take out a new policy you will receive a 45% discount in the first year. This is great if you are applying for Private Medical Insurance for yourself and don’t wish to cover any dependents. You still benefit from the 30% ongoing discount thereafter too.
Alternatively, if you’re interested in insuring your partner or another dependent, you may prefer to make use of the ‘partner goes free’ offer that WPA are currently running. This works alongside your self employed Contractor discount of 20% and allows the second eldest applicant to be insured for free for the first year of the policy. The good news doesn’t stop there however, as once the first year has ended, you again continue to benefit from the 30% discount thereafter.
Fund life cover via your ltd company and save tax
It’s not a subject that we like to think about but it is important to protect any dependents if the worst should happen. As a contractor, you miss out on the life cover offered by a large employer so it is vital that you put a plan into place to secure your family’s future should you die.
The good news is that contractors can now fund life insurance through the business with no income tax or benefit in kind considerations of any kind. You can transfer the cost of life insurance to your business rather than find the cost personally from your post-tax income. It may also be possible to have this payment treated as a business expense.
Unlike the traditional ‘Keyman’ insurance for small business owners, where any payout on death invariably belonged to the company the business or your dependents could ultimately be taxed upon receipt of the funds, with relevant life cover the benefits won’t be liable for inheritance tax in most cases, as long as they are payable through a simple discretionary trust.
The new product essentially works in the same way as the old pension term assurance but does not affect your lifetime or annual pension allowances. So those freelancers with a large pension pot are still be able to benefit from the lucrative tax relief on pensions contributions whilst your life cover contributions now offer you a further opportunity to save tax.
The good news is that even if you decide to hang up your contracting hat and return to permanent employment, you can still benefit from the tax savings by simply transferring your policy to your new employer. Your cover is kept in trust and this not only keeps the money safe from any liabilities that the company has but also makes the plan easier to transfer.
It is possible for ClearSky clients to protect life cover payments if they are unable to work due to illness or injury. After six months the insurer will maintain the payments so that your family or mortgage remains protected; this is called a ‘waiver of premium’.
A lump sum to help you to cope with critical illness
This cover can do more than just settle debts or an outstanding mortgage; it will pay out a lump sum on diagnosis of a range of illnesses and help you to pay for medical bills, adjustments to your home to help you cope with the illness, or simply a holiday to recharge your batteries.
Critical illness cover pays out on diagnosis of a condition rather than on death so that you can make use of the lump sum to pay off debts / mortgages or if it is used for family protection, it can be used as income whilst you are recuperating. The critical illness policy will repay outstanding debts or mortgage loans but the cover should be inflation proofed so that it holds its value for the life of your policy. This means that the sum paid out by the insurer upon death will be worth the same amount at that point as it is now, as it will rise with the level of inflation.
Critical illness is best used in conjunction with Income Protection (Private Health Insurance) which will give you a monthly income if you become too ill to work and will continue to pay until you return. With critical illness cover you will receive a single pay out on diagnosis which is non-refundable, even if you return to good health and like life cover, you can arrange your critical illness policy to cover you for a fixed term such up to retirement, or for the whole of your life.
To arrange a protection review with our award winning protection advisers call 0845 060 8800 or fill in our contact form.
Financial advice is given by ClearSky wealth management, which is a trading name of Contractor Financials Ltd and is regulated and authorised by the Financial Services Authority.
Avoid NHS queues with Private medical insurance
As a contractor you are reliant on being able to work for your income so an unexpected illness can really set you back. With private medical insurance you can avoid the hassle of waiting for the NHS, with high quality treatment when you need it so you can get back on site as quickly as possible.
30% discount for ClearSky clients
We have negotiated special terms for our clients and their families on private medical insurance with WPA, a recognised health insurer that has won numerous awards in the field. With this experienced provider you can gain immediate cover as soon as you join and benefit from a 30% discount on premiums. With WPA you have the freedom to choose your hospital and your premiums are guaranteed not to increase if you make a claim.
To receive a personalised illustration or to find out how you can add extra benefits including unlimited out-patient treatment and alternative therapy plans, fill in our contact form, or call 0845 060 8800 and we will arrange for a WPA representative to email or call you.
