Umbrella on abstract technology background
Being your own boss means putting systems in place to deal with unexpected and costly challenges that can negatively affect your finances and mental health. One of the best tools for this is to have the right forms of insurance.
The policies you need will depend on how many people you employ, the size and type of business you manage, the nature of your business and the assets you need to protect. This article will outline in simple terms the most common insurance products offered to self-employed professionals in the UK.
Protection of key persons
Also known as key people protection, this policy protects businesses from loss of profits if that member of staff is unable to work because they are terminally or critically ill or have passed away. The payout will help with the cost of finding a replacement for that key person and help keep the business afloat. This is similar to a life insurance policy, but it is written against key employees (if you have key employees, otherwise it would be you) who are the biggest players in your company’s success.
Income protection
In the UK, only 6% of self-employed professionals have paid for income protection insurance, but every day accidents happen or people get sick. This policy protects your ability to earn by paying regular income if you are unable to work due to disability or illness. This means you’re not relying on personal savings or credit to make ends meet.
Professional indemnity
It covers legal fees and settlements in the event that a client or client claims that your professional services were not what they expected or caused them to lose money. Some professions such as accountants are required to have this as part of the regulatory requirements of their respective industry bodies, but it could also make sense for many other self-employed professionals.
Public responsibility
It acts as a safety net against random incidents that could affect your business, such as a contractor’s equipment breaking down, a client suing after food poisoning, or a client being injured in your office. This would cover legal costs and compensation you may be asked to pay.
Cyber Liability
Data breaches, cyber attacks and hacking are growing threats. In 2021, 61% of small and medium-sized businesses were victims of a successful cyber attack. This insurance can cover the costs of restoring cyber security, legal costs or compensation to be paid to those affected as a result of a cyber event. Read here for tips on how to prevent brand hijacking, a tactic used by cybercriminals.
Employer’s responsibility
If you employ people, this will cover you against claims made by employees who have suffered an injury or illness as a result of their time working with you.
insurance policy
Award-winning financial advisor Ella Weinberg recommends that all self-employed professionals consider key person protection, income protection, or both depending on their business structure: “If an individual is serious about their financial security, then such an insurance policy guarantees they will always receive a salary regardless of disability .”
To get the best advice to suit your needs, always speak to trusted insurance and financial advisers.