How much are

By Nadine Monks HOW MUCH ARE YOU WORTH?

If you are going self-employed, you may have thought, how can I possibly recreate some of the benefits I would get with an employer, such as sick pay? Or you may have asked, how would my business continue to run if I was unable to work, or worse?

Currently, if you were employed, you would get £96.35 per week Statutory Sick Pay (SSP) if you became too ill to work. It would be paid by your employer for up to 28 weeks.1 This is the minimum you can receive, but some employment contracts may offer more. As someone self-employed, you get nothing.

Now, you may be thinking, I don’t even pay myself, so what am I covering?! However, you should still have the same security as someone employed, so you know there would be a little coming in, just like SSP, if you were too ill to work. In addition, your business costs would still continue, in most cases, so it would help to cover them and the loss of income that you could no longer generate for the business; you may even need to hire some help. Essentially, this kind of cover can improve the financial resilience of both yourself and your business and is probably cheaper than you think.

If you are a sole trader, you could take out your own personal policy for this purpose. If you are a director for a limited company, the premiums normally qualify as a business expense, provided that the employee/person insured doesn’t have a controlling financial interest in the business and that the premiums are paid by the business for the purposes of the business’s financial protection.*

There are also similar concepts for life cover, with current guidelines stating that tax relief may be given on the premiums if the life insured is an employee (or minority shareholder with a share of less than 5%).*

This could be where you, as the director, and other key people in your business are worth insuring, due to your value to the business – not only creating a package for you but your employees as well! Ask yourself some simple questions like, how easily could the business replace its expertise? Would an absence affect business expansion plans or ongoing projects? Would the business be in danger of losing customer orders and/or revenue?

You may also feel you have adequate savings to cover this eventuality, but it is worth considering how this would set you back financially if, for example, you were saving for a house, a new car, or equipment.

We generally all work in exchange for payment and, for most of us, the amount of money we ask for is based on what we need or what we feel we are worth. However, very few of us consider ourselves a financial asset. If you were to take the time to work out your annual salary with any increases year on year over your working life, you might see yourself a little differently. This is your true financial worth to yourself, your business, and your family. For someone self-employed, this can be harder to ascertain, but we all have an equivalent financial worth.

Anything worth this much must be worth insuring, right? Your livelihood and lifestyle are far more valuable than a fancy phone or washing machine. Yet, just 9.4% of the self-employed own a policy, in comparison to 19% having mobile phone insurance.2

Something such as income protection could be a really simple and affordable solution. There may also be other things on your wish list, like private health cover or a critical illness plan.

We have provided a short overview in this article; however, there is clearly a lot to consider and we would suggest you get some quality financial advice around the subject.

At Forces Family Finance we provide completely free whole-of-market tailored advice to help you identify which policies would be most suitable for your situation, with a personal adviser on hand to guide you through the process, review your policy regularly, and be there at point of claim should you need it.

About the author Nadine Monks, Director, Mortgage & Insurance Adviser, Will Writer

www.forcesfamilyfinance.co.uk 03303322614 (local call rates apply) ForcesFamilyFinance forcesfamilyfinance

GLOSSARY

Income protection: A policy designed to replace your income if you are unable to work due to accident, illness, or injury.

You can choose for the policy to pay out from day 1, 30/60/90 days, or 6/12 months. This is known as the deferment period and is the length of time you have to be unable to work for before you can benefit from the policy – think of it a bit like an excess.

The policy would then pay out for a set period of time – 1, 2, or 5 years. You can also get comprehensive ones that cover you until the age of retirement or when you are able to return back to work, whichever is sooner. There is generally no limit to how many times you can claim during the life of the policy, as long as it can be verified by a medical professional.

Private medical insurance: A policy designed to allow you to use the benefits of a private health care service, the extent of which depends on your selected policy options. This could be for a consultation, surgery, or treatment, for example.

Critical illness cover: A policy to make a payment (normally a lump sum) upon diagnosis of a specified critical illness.

Life cover: A policy designed to make a payment, either by lump sum or monthly pay-out, in the event of either your own death OR that of a key person.

*These points are not exhaustive and guidance should be taken from the HMRC site. It is important to obtain tax advice from your accountant specific to your circumstances as this article cannot be deemed taxation advice.

References 1 www.gov.uk www.gov.uk/statutory-sick-pay 2 Drewbury Insurance Blog 2020 www.drewberryinsurance.co.uk/ income-protection-insurance/guides/interesting-income-protectioninsurance-statistics