Independent Financial Advisors for IT Contractors
Published on 2nd February 2009
In uncertain times it is important not to tempt fate by putting off essential protection for you and your family.
ContractorFinancials urges Contractors to reconsider their protection needs and make sure that your family and your lifestyle are protected against a loss of income due to accident, illness or death.
Contractor Income Protection
Income protection can provide an essential buffer if you are unable to work due to illness or injury by paying a tax free monthly income to protect your family, giving you the time to recuperate free from financial stress.
It is important to be realistic about the amount of money you would require if the worst should happen and you can no longer work. Whilst you may be able to cut back on some areas, there will be other luxuries that will be essential if you are ill over a long period of time. You may need changes made to your house or car in order to aid mobility or need to employ a carer. Income protection can offer you the opportunity to cover any of these expenses as it is possible to protect up to 75% of your income.
You have the option to defer payments if you have savings to cover a short term illness such as a sporting injury or you can opt for a policy that will pay out the next day so that you can keep savings for their intended purpose. This flexibility means that you can tailor your premiums to an amount that you can afford and you have the option to alter you policy should your financial circumstances change.
Make sure that the policy you choose covers you if you are unable to carry out your 'own' occupation as opposed to some lesser policies that will only pay out if you are unable to carry out 'any' occupation. Any occupation means that despite your skill level and current income, an insurer would argue that you are still able to work in a supermarket, stacking shelves and are therefore unable to claim. This is often overlooked by consumers looking at income protection options and can often mean that a cheaper quote doesn't offer you an effective safety net.
It is essential to inflation proof your policy so that the payment increases at the rate of inflation and will give you the same monthly income for the life of your policy. This ensures that a policy with benefits of £2000 per month will be worth the same amount if you come to claim in ten or twenty year's time.
Critical Illness Insurance
Working in challenging environments where stress is a way of life, puts Contractors at high risk from Critical Illnesses such as heart attack, stroke or cancer. Whilst those Contractors without dependents may not see the need for life cover, Critical Illness allows you to protect yourself in order to preserve the lifestyle that you enjoyed before you fell ill, or make the necessary changes to accommodate your new lifestyle.
A lump sum is paid out on diagnosis of a Critical Illness which you don't have to pay back even if you return to full health and get back into the rat race, so you can spend the money on whatever you please. You could pay off your mortgage, make essential home improvements to make your life easier, or take that once in a lifetime trip that you always wanted to enjoy.
You can cover yourself for a fixed term such as until your children have grown up or for your entire life. You can choose to have a decreasing amount of cover which is useful for covering a repayment mortgage that decreases over time, or a level amount which will pay out a set sum at any time.
Combining Critical Illness with Income Protection enables you to cover yourself for any eventuality. If you were diagnosed with a critical illness and you enjoyed the security of both covers then you would not only receive a lump sum payment on diagnosis from your Critical Illness cover, but also a regular monthly income from your Income Protection cover until you return to work.
Life Cover
Whilst Life Cover is not essential for all Contractors, if you are a homeowner or have dependents then you might consider protecting them in the event of your death. Life Cover pays out a lump sum to cover debts such as a mortgage or to provide an income for your family when you are no longer able to. As with Critical Illness, there are 2 types of life insurance; term cover offers a low cost cover over a certain period which will then lapse without value. Whole of life cover is more expensive but you are given the assurance that the insurer will be paying out at some point - no matter how old you are when you die.
Again, like Critical Illness cover you can have level term assurance that stays the same value, or a decreasing term assurance that can cover a decreasing loan such as a repayment mortgage. Alternatively, you can take out a family income plan which will pay out a monthly income to your family after you die, although its worth bearing in mind that the amount they receive will vary depending on how early into the term you die.
Don't cut corners - stay protected
Some believe protection to be unnecessary, but for Contractors it should be seen as essential. If you are willing to insure your car, your home and your belongings, it seems sensible to insure your ability to work and earn an income to continue your lifestyle and protect your family.
ContractorFinancials can help you to find an affordable cover to suit your circumstances as we search the whole of the market to offer independent advice to our clients. It can be easy to get lost in the maze of insurance options available and you could find yourself under insured with a policy that is unsuitable for your contracting status. With our experience in dealing with Contractors we are able to search for the insurers and policies that are tailored to your needs and ensure that you have the right protection when you need it most.
Steve BirchallThe whole process was so quick and easy with no worries...
Nick WilliamsI would have no hesitation in recommending your company to others...
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