Protecting what you’ve built: financial protection for the self-employed

Working for yourself can be incredibly rewarding; you may have freedom, flexibility, and control, but with that independence also comes responsibility. Without the safety nets that many employees enjoy, such as sick pay, employer-provided life cover or a company pension, your financial wellbeing may rest entirely on your shoulders.

That’s why financial protection can play an important role in planning for your future. The right cover can help ensure that if life takes an unexpected turn, you and your family remain financially supported.

Why financial protection matters

Your income is likely to play an important role in supporting your day-to-day financial commitments, both personally and professionally. If illness, injury, or another life event prevents you from working, it could become difficult to keep up with regular expenses or maintain your lifestyle.

Financial protection policies, such as Income Protection, Critical Illness Cover or Life Cover, can help bridge that gap that appears when your income suddenly stops but your everyday bills and commitments don’t. Financial protection policies are designed to provide financial support when it’s most needed, helping to reduce stress and give you greater peace of mind.

Ultimately, having appropriate protection in place means you can focus on what matters most, running and growing your business, knowing you’ve taken steps to look after your income and your loved ones, with confidence that you’re covered should unforeseen circumstances affect your income, health, or family’s wellbeing.

Types of protection to consider

Life Insurance / Relevant Life Cover

Life Insurance could provide a tax-free lump sum to your chosen beneficiaries or a trust if you were to pass away. This can help your family manage living costs, mortgage payments, or other financial commitments.

Family Income Benefit

Rather than paying a single lump sum, this cover can provide your family with a regular, tax-free income in the event of your death. It’s designed to help them maintain their lifestyle and meet everyday expenses such as mortgage payments, rent, and household bills.

Income Protection / Executive Income Protection

If illness or injury stops you from working, Income Protection could pay a regular income to help you manage ongoing expenses, given the lack of statutory sick pay, this type of cover can help you stay financially stable while you focus on recovery.

Critical Illness Cover

Critical Illness Cover may provide a tax-free lump sum if you’re diagnosed with a serious medical condition such as cancer, heart attack, or stroke. It can help with treatment costs, lifestyle adjustments, or lost income — giving you more options during recovery.

Private Medical Insurance

Private Medical Insurance is designed to give you faster access to healthcare, specialists, and treatment. This could help you recover sooner and return to work more quickly, reducing downtime and protecting your productivity.

Evolving protection needs as your circumstances change

Your protection needs will naturally shift over time, but this is not always tied to age. Changes in your business, health, financial goals or family situation can all influence the type and level of cover that is right for you.

You may experience periods of higher earnings, business growth or increased responsibilities at any stage of life. For some people, peak earnings come early, especially in physically demanding roles or high-pressure industries. Others may see their income rise later as their business develops or their career evolves.

Rather than focusing on age brackets, it can be more helpful to think about how protection fits into your current circumstances.

Early stages of your career or business

If you are building financial stability or taking on new commitments such as a mortgage, family responsibilities or business investment, products like Income Protection, Life Insurance and Family Income Benefit can help form a strong foundation.

It is also worth noting that protection is typically more affordable the earlier you take it out and securing cover while you are young and healthy may offer better long-term value.

Periods of higher earnings or increased responsibility

When your income grows or your financial responsibilities increase, whether this happens in your 20s, 40s or 60s, reviewing your protection can help ensure it keeps pace. Critical Illness Cover and Income Protection may help support your income, while Life Insurance can help provide reassurance for those who depend on you.

Later career stages or shifting priorities

As your focus turns more toward health, succession or long-term planning, products such as Life Insurance, Critical Illness Cover and Private Medical Insurance can help you maintain financial security and access appropriate healthcare.

It is important to remember that waiting too long to take out protection can make cover more expensive, and in some cases limit your options if health conditions develop.

Building your protection plan

Every self-employed person’s situation is different, your business, family, and future goals are unique, and your protection strategy should reflect that.

Speaking with a qualified financial adviser can help you:

• Identify the potential financial risks you may face
• Explore suitable and tax-efficient protection solutions that can help mitigate those risks
• Build a plan that can adapt as your life and business evolve

Hard work builds your business and putting the right protection in place could help make sure that effort and the people you care about most are secure for the long term.

Please note:

This article is for general information only and does not constitute advice. All information is correct at the time of writing and is subject to change in the future.
The Financial Conduct Authority does not regulate estate planning, cashflow planning, tax planning, trusts, Lasting Powers of Attorney, or will writing.

Note that life insurance and financial protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.

Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.