Being your own boss means putting systems in place to take care of unexpected and expensive challenges that can have negative effects on your finances and mental health. One of the best tools for doing so is having the right forms of insurance coverage.
The policies needed will depend on how many people you employ, the size and type of business you’re running, the nature of your work and the assets you need to protect. This article will lay out in simple terms the most common insurance products offered for self-employed professionals in the UK.
Key Person Protection
Also known as key man protection, this policy protects businesses from losing profits if that a member of staff is unable to work because of becoming terminally or critically ill or passes away. The payout will help with the costs of finding a replacement for that key person and help the business stay afloat. This is a similar policy to life insurance, but it is taken out against key employees (if you have key employees, otherwise this would be you) who are the most players in the success of your company.
Income Protection
In the UK, just 6% of self-employed professionals have paid for income protection insurance, yet every day accidents happen or people become sick. This policy protects your ability to earn by paying out your regular income if you can’t work due to disability or sickness. This means not relying on personal savings or credit to make ends meet.
Professional Indemnity
Covers legal fees and settlements should a client or customer claim that your professional services were not as they expected, or caused them to lose money. Some professions such as accountants are required to have this as part of their respective industry body’s regulatory requirements, but it might make sense for many other self-employed professionals too.
Public Liability
Acts as a safety net against accidental incidents that could impact your business such as a contractor’s equipment breaking, a customer suing after getting food poisoning, or a client getting injured at your office. This would cover legal fees and compensation that you might be asked to pay.
Cyber Liability
Data breaches, cyber attacks and hacking are growing threats. In 2021, 61% of SMBs were the victim of a successful cyberattack. This insurance can cover the costs of restoring cyber security, legal expenses or compensation to be paid to those affected as the result of a cyber event. Read here for tips on how to prevent brand hijacking which is a tactic used by cyber criminals.
Employer’s Liability
If you employ people this will cover you against claims made by employees who suffer injury or illness due to their time at work with you.
Award-winning financial advisor Ella Weinberg recommends that all self-employed professionals look into having key person protection, income protection or both depending on their business structure, “If the individual is serious about their financial security, then having such an insurance policy guarantees they will always receive a salary irrespective of incapacity.”
To get the best advice suited to your needs, always speak with trusted insurance advisers and financial advisers.
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