Contractors do not benefit from the sick pay and death-in-service payouts that many permanent employment roles enjoy and so must make their own arrangements for permanent health insurance, critical illness cover and life cover. So the information about Contractor Income Insurance can be crucial to their business.

If a contractor is unable to work for any reason, then they won’t get paid because the client is buying a business-to-business service from the contractor’s limited company or umbrella company, and not employing them.

Therefore, it is good contracting practice to save enough cash to cover short periods away from work due to illness. But if the condition is long term or terminal, uninsured contractors and their families can quickly run into financial difficulty.

The types of life and illness cover available

There are three main categories of life and illness cover that contractors should consider:

• Permanent health insurance
• Critical illness cover
• Life cover.

Permanent health insurance will provide a contractor and their family with a monthly income in the event that the contractor cannot work. Depending on the policy, it could provide an income all the way through to retirement if the contractor can never work again.

Critical illness cover comes into play when a contractor suffers from a serious illness, such as cancer, a heart attack or a stroke. It pays out a lump sum or an annual payment on diagnosis of serious conditions. The cash can be used to fund a range of measures, such as necessary alternations to a home and changed or reduced working patterns.

Life cover, which many permanent employees know as their ‘death-in-service’ benefit and is typically three or four times salary, pays out a lump sum in the event of the contractor’s death. The cash can be used to fund an income for the contractor’s family or to pay off a mortgage.

Choosing the right cover

There is a huge range of health, critical illness and life policies available from an equally large number of providers, and the requirements of each contractor and their family will be unique to their circumstances.

As a result, it is advisable for contractors to seek expert professional advice when selecting contractor insurances for health, critical illness and life cover and to regularly review their requirements over time, especially when personal circumstances change.

And because most contractors’ incomes fluctuate and may include a component of salary and dividends, which could have an impact on the value of the life and health benefits required, it is essential that the professional adviser is a specialist who understands the contracting market, not a generalist used to employees with standard salary-based incomes to help them identify the best solution for a Contractor Income Insurance.

The cost of cover can also vary considerably according to the contractor’s specific requirements, and premiums generally rise because of any pre-existing medical conditions.

However, when deciding on whether to invest in contractor income insurance for health and life cover, contractors need to weigh up the cost of ensuring financial security in the event of illness or death versus having to depend on the state.

Author's Bio: 

Dave Chaplin was an IT contractor who knows what it takes to carve out a successful contracting career. He has turned all his and dozens of contractor experts’ experiences into a fantastic resource of guides, advice & detailed contractor information, including loads of information on Contractor Income Insurance, which you can download free from ContractorCalculator.