Whilst the PPI Payment Protection Insurance (PPI) sold by High Street banks is often unsuitable for Freelancers and the self employed, there is an alternative insurance that can cover your loans, credit cards, mortgage or living costs against loss of income.

Is there an alternative suitable for freelancers?

Permanent Health Insurance (PHI) which is also known as Income Protection, will pay you a monthly income if you are unable to work due to any illness or injury and you can protect up to 55% of your normal income. This means you can continue to make debt repayments and cover your essential outgoings until you are able to return to your contract.

You can choose a waiting period before benefits begin to be paid out to suit your circumstances and so if you have savings to fall back on you could lower your monthly premiums by taking a three month deferred period for instance. However you can also access a one day cover which will pay out on the first day of an illness or injury if you need immediate protection. The good news is that unlike PPI which will typically only pay out for a maximum of one year, Permanent Health Insurance will continue to pay out until the end of your chosen policy term if you are unable to return to work, so you could receive a monthly income from your insurance until you reach retirement age!

These comprehensive policies allow you to arrange cover on an “own occupation” basis which means that the policy will continue to pay out until you are well enough to return to your original occupation as a freelancer rather than forcing you to stack supermarket shelves if you are deemed well enough to do so. You can also “inflation proof” your policy which is vital to ensure that the £1000pm that you are covered for today is still worth £1000 if you need to claim in years to come.

Arranging your insurance through a contractor specialist Independent Financial Adviser or insurance broker will ensure that your policy is ideally suited to your Freelance status and should give you the peace of mind that you are completely protected if you are unable to work due to illness or injury.

Content provided by Tony Harris is MD of ContractorFinancials, the Contractor specialist IFA

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