What protection is available to contractors? 

Everyone wants to be able to provide for their family, but what would happen to your loved ones in the event of your death? It is a well-known fact that many people do not have any protection provisions in place.

Buying any protection product can be a minefield as there are so many areas to consider. However, as a contractor, utilising the services of a specialist that understands your working status is the best place to start. They can offer advice, help and support in setting up the right cover to protect any areas of concern you have.

A policy could pay off the mortgage and any debts ensuring your family have a roof over their heads when you are no longer here. It could also cover ongoing bills and expenses, removing further financial stress. 

What’s in the guide?

  • The financial review process
  • Types of life cover
  • Critical Illness cover explined
  • Income Protection explained
  • Key cover policies
  • Next steps

The financial review process

As a responsible brokerage, our consultants will be able to provide you with a holistic financial review based on your contractor status, allowing you to grow and protect your wealth.

Initially, they will ensure you have sufficient provisions in place to help if something was to happen to you that impacted on your ability to pay your mortgage. In addition to putting in place recommended protection policies, your consultant will review any existing provisions, offer a referral service for wills and suggest suitable contingency planning.

The second area is to ensure your longer term planning is
on target and sufficient for eventual retirement. A member
of our sister company Contractor Wealth division will review and advise on a number of areas including: pension schemes, income changes and available tax allowances. 

Types of life cover

Life Cover is a vital aspect of financial planning to ensure your dependents are taken care of in the unfortunate event of you passing away.

Unlike permanent employees, who will more than likely be covered by a workplace policy provided by an employer, it falls on your shoulders to make sure your family are protected when you are no longer there.

As with any cover it is important to understand your options in order to choose what is most appropriate for you and your family. There are two main categories: Term Cover and Whole of Life Cover.*

Term Cover is the less expensive of the two and only lasts for the period of time you specify. Once this period is over, the cover subsequently finishes. Term Cover can be set up in a variety of different ways in order to address key needs.

Whole of Life Cover tends to be the more expensive option, as it provides the protection offered by the Term Cover, as 

well as containing an investment element. The benefit of this policy is that it may have a cash value although the value
isn’t guaranteed like any investment and can go down as
well as up. For this fact the cost is higher than a simple term assurance, these policies tend to be most suitable for clients who have lifetime dependants or a specific need for a sum of cover for life such as covering inheritance tax or funeral costs. The benefit is that it will cover you from any age until death, although at a significant increase in cost.

Finding the right Life Cover plan will take time and can be a difficult task as you may not know what is most suitable for you. It is always important to seek expert advice on matters as sensitive and important as life cover.

The various ways in which Life Cover can be set up include: 


As the title implies, the sum assured decreases over the
term of the policy. This type of cover is most commonly
taken alongside a repayment mortgage, to ensure that the remaining debt at any point during the mortgage term is settled in the event of premature death. If mortgage debt remains outstanding on premature death, mortgage payments will still need to be covered to avoid repossession of the home.


With this plan your dependants will receive a lump sum that does not reduce over the term of the policy. It is suitable to take alongside an interest only mortgage where the debt does not reduce, and also as a lump sum to protect the lifestyle of a family or partner if the main income earner were to pass away.

Increasing Tenants

In simple terms, the sum insured increases over the life of
the policy. It is designed to address inflation and changes
in circumstances over the term of the policy. Premiums may increase for additional cover, but they will always be based on your health at the start of the policy.

Family Income Benefit

You can decide a predetermined monthly or annual income that is to be paid to your dependents in the event of your premature death. This income could be designed to cover mortgage payments or living costs for the family to avoid financial hardship. The payments will continue from the death of the insured person until the end of the policy term.

Critical illness cover explained

Illness is unavoidable but in most cases only causes minimal disruption to our day to day lives. However the reality is, over half of all recorded deaths in the UK are related to heart 

disease or cancer.* It is impossible to anticipate a serious illness, which is why protection is so important should the unfortunate happen.

If being ill is not enough of a burden, it will probably be joined with the added stress of monthly bills, debts and mortgage repayments, unless a level of cover has been taken out previously to protect you and your family from the unforeseen illness.

Critical Illness Cover can help household bills with a lump sum, on diagnosis of specified serious illness. This can help to pay for medical expenses and funding any life changing events, such as adapting the home and paying for childcare. If you ever do return to full health you can rest assured that the lump sum pay-out is non-refundable and tax-free.

*Based upon mortality data for 2014 which attributed 27% of all deaths that year to cardiovascular disease, and 29% to cancer in the same year. Data published in ‘Cardiovascular Disease Statistics, 2015’. Published by the British Heart Foundation.
When taking out Critical Illness Cover it can be beneficial to take out Income Protection cover alongside. This will ensure you receive monthly payments if you are too ill to return to work, on top of the lump sum when you are first diagnosed with the serious illness.

One of the negatives of being a contractor is that you do not receive the luxury of having these matters taken care of by an employer. Your financial affairs and emergency planning are
in your own hands, so unless you have substantial savings, Critical Illness Cover is worth considering. Similarly to life cover, there are options to start a Critical Illness Cover policy on an increasing, level and decreasing basis. 

Income protection explained

Income Protection Cover is an insurance policy designed to pay you a regular tax free income to support you if you are unable to work due to illness. Policies tend to be set up to pay out until retirement or return to work.

This protection is suitable for anybody who does not get paid indefinitely when they are off sick from work. For the self- employed it is arguably more important, as they do not receive any benefits from an employer. The amount of cover is based on a percentage of your income and there is no limit on the amount of claims that can be made during the policy term.

Anyone between the ages of 16 and 59 can apply for this type of cover, in order to maintain their standard of living should long term illness or injury occur. It is worth noting that being declared medically unfit to work by a medical professional can trigger a claim. There is no finite list of claimable illnesses, which makes it a popular form of emergency planning for contractors. 

Key Cover Policies

  • Income Protection
  • Family Income Benefit
  • Critical Illness Life Cover 

Next steps

To get more information or to speak to our expert team contact us on

01489 555 080

or email us at enquiries@cmme.co.uk 

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