Protection planning for the self-employed

Business Person paying invoice on the phone with a newspaper, calculator and pen on the desk

If you are a sole trader or franchisee, the most valuable asset your business has is you. This means that one of the most significant risks your company has is also you. When your profitability relies on you as an individual being fit and well, then you also need to plan for when you may be incapacitated enough that you are unable to function in your current role.

Hopefully, you have put in place professional indemnity insurance.  There are also other such business protection plans to consider. Such as what financial support you would need if you become ill. How will you meet your responsibilities and how will the business continue to provide you with an income if you are unable to carry out the necessary work day today. For many people who are self-employed, if they do not work, then they do not get paid.

There are many different areas to think about when considering protection planning for the self-employed:


Health insurance

You may not have thought about private health insurance as in the UK the NHS provides a health service for free. However, as a self-employed business person, the benefits of taking out health insurance should not be overlooked.

When time is money, getting diagnosed and treated as quickly as possible is crucial. Private health insurance means that you will have access to treatment sooner. If you need to see a specialist, you are unlikely to have to wait months for an appointment.

Having access to the necessary medical assistance also allows you to get a diagnosis for your illness sooner, so that you can get back to your business quicker than you may have otherwise been able to.

When you run your own business, it’s not always convenient to attend a medical appointment at a set time or during core hours. Private medical insurance can potentially give you more flexibility to choose appointment times that are convenient to you and provide the least disruption to your business.


Income protection

How will you pay your bills if your income is reduced or is totally non-existent due to a severe illness? It doesn’t have to be a long-term sickness, but just taking three months off work which includes the recuperation time as well, can have a significant impact on your financial stability, especially if you have a small business to run.

Income protection is a must insurance as it will provide you with the financial income support if you are unable to work.


Life insurance

Does your family rely on the income you earn from your business? If you died would your business also seek to exist? How would your family cope financially?

Life insurance is a financial protection that pays your dependents either a lump sum or regular payments when you die.

If you have children or a partner that you contribute towards financially, then life insurance is paramount – something, you should be seriously considering.


Contingency planning

Do you have a contingency plan for your business? Something that states what would transpire if specific things happened? These are often events such as your office catching fire and destroying everything, your IT system being hacked or losing one of your large clients.

However, you also need a robust plan in place for if you were ill, whether that means you are out of action for a few days or many months.

Here are some things to consider:

  • How will you communicate with clients about your illness if required?
  • Who will carry out the work on your behalf – could you outsource it?
  • If you were incapacitated how would a trusted person access company information?
  • Who is that trusted person who could handle your business affairs if needed?
  • Are your processes well documented for someone else to follow?
  • Where are your passwords located and what is the process to access them if you were seriously unwell?
  • If you died what happens to the business?
  • What would be the process for closing the business if your family had to do this? Do they know what would be required?
  • Are any insurances you have well documented if they needed to be claimed against?


Getting professional advice

There are many aspects to consider when you are self-employed and want to ensure that you have sufficient financial cover in place to protect your business and yourself – see MRA’s free download for more information about the different options available. Consider seeking professional financial advice, so you feel assured that the financial decisions you make are aligned with your wider goals and aims not just for the business but also personally.

Professional financial advice will help you to discover the appropriate financial protection for your circumstances, highlight areas you may not have considered and be prepared for any challenges ahead.


Further information

If you found this information useful you may also want to check out the following:

How can your company provide you with financial security?

The benefits of having a business plan

Why you need stakeholder and business loan protection!

MRA help individuals, businesses and families achieve the best quality of life they can with the resources they have. MRA specialise in corporate solutions, cash-flow analysis, taxation, debt management, savings and investments, lifestyle planning and much more.

Business Consultants based in East Sussex we service clients across the South East, Sussex and Kent, including smaller towns such as Ashford, Battle, Bexhill, Bodiam, Brighton & Hove, Cranbrook, Crowborough, Eastbourne, Hailsham, Hastings, Heathfield, Herstmonceux, Lewes, Mayfield, Newhaven, Rye, Seaford, Sevenoaks, Tenterden, Tonbridge and Tunbridge Wells.