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Income protection cover for the self employed

Depending on what you do, you may have income coming in from earlier work, even if ill for several months.


Arguments have arisen between customers and insurers as to the basis of pay out to the self-employed. Insurers may argue that they should only pay on nett profit. The self-employed counter that unless their accountant is a half-wit, several items that employed people have to pay out of nett income, are treated by the self-employed as a business expense e.g. car and telephone.


The self-employed can take out individual policies rather than business ones, but must check on what basis the insurer will pay out.


A typical basis for payment is your pre-tax share of the gross profit after deduction of trading expenses, in the 12 months immediately prior to the date of your incapacity. Some policies operate an average over the last 3 years as they realise that self-employed people often have a fluctuating income and it is unfair to penalise you if the year before your accident was unusually bad.