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ActiveQuote Global Reach, Dunleavy Drive Cardiff South Wales CF11 0SN 0800 862 0373

Self-Employed Income Protection

  • A monthly tax-free benefit if you are unable to work
  • Usually covers between 50 and 70 per cent of your income
  • A monthly tax-free benefit if you are unable to work
  • Usually covers between 50 and 70 per cent of your income

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What is self-employed income protection?

Income protection pays you a monthly tax-free sum if you are unable to work due to an accident or sickness for a set period of time. Putting self-employed income protection insurance in place protects you from being out of pocket during a difficult time and leaves you with one less thing to worry about. It helps you, as a self-employed person, not to worry about what would happen if you were too ill or injured to work.

I’m self-employed. Why do I need self-employed income protection?

Income protection for the self-employed is one of the most important types of insurance to consider when choosing to work for yourself. Employment usually includes company sick pay or employee sickness insurance. Being self-employed means you need to think about how you would cope financially if you were unable to generate an income due to illness or an accident.

Income protection insurance for self-employed people is ideal for anybody who works for themselves or runs their own business, and means you could receive between 50% and 70% of your income if you were unable to work due to illness or injury.

There are approximately 4.37 million self-employed people in the UK. Research* shows that more than half are believed to have no life insurance, private medical insurance, critical illness cover or income protection in place.

This means that self-employed people are often under much greater pressure to get well and back to work as quickly as possible. Policies like self-employed income protection are there to take that pressure away.

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How does self-employed income protection insurance work?

Income protection insurance for the self-employed works in the same way as a standard income protection insurance policy. It will provide you with a regular tax-free income if you cannot work due to illness or injury, usually for a set period of time.

Income protection insurance for self-employed workers usually covers between 50% and 70% of your income for a set amount of time specified at the outset of your policy. 

Like most income protection policies, the monthly payment you receive from a self-employed income protection policy can be used however you choose, whether that’s for mortgage payments, bills or other lifestyle expenses.

As a self-employed person solely responsible for generating your own income, a drop to very little or no income can be a daunting prospect. Making regular monthly payments to your insurer for a self-employed income protection policy means that, if you need to make a claim, you are able to do so and receive a regular pay out in return.

Most self-employed income protection insurance policies only pay out for a specific period of time. The cover is broadly designed to help you when you’re facing a temporary health challenge, until you can get back to working again, and might pay out for a year or two, for example.

Income protection is not to be confused with critical illness or life insurance, which are designed to pay out a significant lump sum to cover you for a much longer period of time or until you die, should you be diagnosed with a serious illness.

What are the benefits of self-employed income protection?

  • A monthly income to use as you wish until you return to work
  • Peace of mind you can cover your bills if you are too ill or injured to work
  • No need to dip into your savings to get by during a difficult time
  • Tax-free benefit
  • Choose a level of cover to suit your needs and budget
  • Makes the jump from employment to self-employment less daunting

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How long do self-employed income protection policies pay out for?

Like other income protection policies, self-employed income protection falls under two categories: short-term policies and long-term policies.

Short-term policies tend to only pay out for a maximum of 12 months, whilst long-term policies pay out until the end of the set policy term – often until retirement.

How much does self-employed income protection cost?

The cost of your self-employed income protection is based on a range of factors. These include:

  • How much you want your monthly payment to be
  • The likelihood that you’ll find yourself unable to work
  • Your age
  • Your lifestyle, including whether you smoke and exercise
  • Your current levels of health and overall medical history
  • The risk factors associated with the kind of job you do
  • How long the ‘waiting period’ is before the policy kicks in

The best way to calculate how much cover you need is to add up all your debts including your mortgage, loans, credit cards and so on. Then add on any other expenses you’d need to cover like food and childcare. This will help you calculate what level of cover you should be looking to buy.

What about Unemployment Insurance for the Self-Employed?

Many self-employed people are interested in unemployment insurance. However, the qualifying criteria for unemployment cover are much stricter for self-employed workers. Many self-employed unemployment insurance policies state that the business must have been wound up through ‘no fault of your own’ in order for you to claim, and this can be difficult to prove.

One of our specialist advisers would be happy to explain unemployed insurance for the self-employed in more detail.

Why should I use ActiveQuote to compare policies?

Rather than visiting each insurer individually, why not compare self-employment income protection insurance quotes with us now? Our comparison system allows you to compare income protection quotes online in minutes, and buy a policy straight away.

As you can see, there are many different factors that can affect the cost of your self-employed insurance and your cover. ActiveQuote is an FCA authorised broker with a team of expert advisers to help you choose between your self-employed income insurance quotes. Our team will also annually review your self-employed income protection insurance policy to make sure you are getting the right cover for the best price.

If you are self-employed you might also want to consider investing in a health insurance policy, which could allow you to avoid long NHS queues and receive medical treatment quickly and with a specialist of your choice.

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What is the difference between self-employed health insurance and self-employed income protection?

While they can be claimed for under similar conditions, income protection and health insurance for the self-employed are two very different types of cover. Income protection replaces any earnings, such as your salary, in the event you are no longer able to work and allows you to keep up with your usual outgoings. 

Accident, Sickness and Unemployment policies are designed to pay for specific outgoings you might incur in being unable to work, such as medical treatment and/or your mortgage payment. It is specifically intended to pay off any medical treatment and other expenses you may face owing to a medical condition you are affected by. The amount is usually paid directly to those it’s needed for, meaning you won’t receive any funds to help with other costs you may face.

Self employed income protection pays you a lump sum to use as you wish, and to help maintain the lifestyle you are used to.

What else do I need to know about self-employed income protection insurance?

Whilst some income protection policies require proof of income before a pay out is made, there are several self-employed income protection policies that don’t require this.

As a self-employed person you might not have the information you need to hand to be able to prove your income at the time you require a claim to be made. As a sole trader it might be difficult to show consistent earnings on a month by month basis, or you might not have been self-employed long enough to have completed a full tax return, for example.

There are self-employed income protection insurance providers which recognise that your income is more likely to fluctuate as a result of being self-employed, and there are policies available that will pay out a set amount where the client doesn’t have to prove their financial income in order to benefit.

So, if the line of work you’re in means the income you receive varies greatly from month to month you still have peace of mind that the pay out you receive still stands.

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