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Contractor Protection Guide

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?

  • Types of cover available
  • Why do you need protection?
  • Life Insurance
  • Income Protection Insurance
  • Critical Illness Insurance
  • Relevant Life Insurance
  • Buildings & Contents Insurance

Types of cover available

With expertise and understanding of the way contractors work, CMME can help protect yourself, your family and your home in a number of ways:

Life Insurance:

This will ensure your family is taken care of in the unfortunate event of something happening to you.

Income Protection Insurance:

Replaces part of your income if you are unable to work for a long period of time because of illness or disability.

Critical Illness Insurance:

Pays out a lump sum if you’re diagnosed with a critical illness. You can use the pay-out for any- thing such as, to pay for medical treatment or to pay off your mortgage.

Relevant Life Cover:

Allows peace of mind in the event of death, meaning that if the worst were to happen, a tax-free lump sum will be paid out to dependents to take away the financial pressure

Building & Contents Insurance:

This insurance is designed to protect your property and belongings against various perils such as fire, theft or damage.
Buildings and Contents Insurance both come under the bracket of Home Insurance and can either be bought separately or as a combined policy.

Why do you need protection?

Contractors and anybody taking on a mortgage commitment are recommended to have protection in place to protect what is most important to them. Nobody likes to imagine something happening to them or their family which then results in detrimental consequences.

Having a review or chat about the options available can guarantee that if something happens that commitments can be maintained, and any financial risks are removed. It’s all about having the peace of mind and a plan to fall back on, contractors are vulnerable in these situations as they have no employee benefits.

Life cover

The majority of individuals have enough financial worries that they do not have time to think about what would happen in the event of a death. Claiming on a Life Cover policy can make the difference, ensuring you are financially secure, should the worst happen.
The vast majority of mortgage holders do not take life cover. This is particularly surprising when you consider that 98% of life cover claims were paid out in 2014. *

Finding the right Life Cover plan takes time, as you may not know the most suitable product for your needs. It is always important to seek expert advice on Life Cover.

*Claims data published by the Association of British Insurers in ‘UK Insurance & Long-Term Savings Key Facts 2015’, and ‘UK Insurance & Long-Term Savings Key Facts 2014’.

Income Protection Insurance

Income Protection covers you if you can’t work due to illness or injury. It replaces the income you would usually be earning until you can start working again or until you retire or die for more serious cases.

If you become ill more than once within your cover, you can claim on your policy as many times as you like.

Critical Illness

As a contractor, you work in a challenging commercial environment, and as we know illness
is unavoidable. However, when these two factors are combined, financial pressure can ensue quicker for contractors given the lack of employee benefits. Over half of all recorded deaths in the UK are related to more serious illnesses, such as heart disease and cancers. * These are two common critical illnesses a policy would cover, with others including strokes and Multiple Sclerosis (MS).

The effects of these serious conditions are now treatable thanks to modern medical advances. However, these same illnesses can often leave you in a reduced state of health.

Along with the added stress of monthly bills, debts and mortgage repayments, your personal and financial health may be severely affected causing longer recovery periods and ultimately more stress.

Video: See how our Critical Illness Cover service helped Elaine support her family when she was diagnosed with cancer. Watch now

*Based upon mortality data for 2014 which attributed 27% of all deaths that year to cardio vascular disease, and 29% to cancer in the same year. Data published in ‘Cardiovascular Disease Statistics, 2015’. Published by the British Heart Foundation.

Relevant Life Insurance

Relevant Life Insurance is a form of cover, originally designed for companies to provide death in service policies for their employees. However, providers have been able to adapt it for limited company contractors operating on their own as a one-man Limited Company. It is covered by legislation that means premiums paid through the company are viewed by HMRC as business expenses and therefore not subject to the same taxes as those paid through personal income. When you take out Relevant Life Insurance, the policy is placed into a trust for the beneficiaries on the cover. If the worst were to happen and the policy holder dies, the trustees make a claim and the policy pays out in a lump sum outside of the company.

Due to the way that the policy is structured in trust, the funds go directly to whoever is noted as a beneficiary, free of Inheritance Tax. If the contractor decides to go back into permanent employment, the flexibility of the policy allows it to be cancelled if no longer needed; continued on a personal basis; or transferred to the new employer at any point.

Buildings & Contents Insurance

If you take out a mortgage to buy your house, it is a legal requirement to have buildings insurance on the property to protect the mortgage companies’ interest in your property and, and if it requires repair. If you are looking at selling your house, you will need buildings insurance as a lender requirement at the exchange of contracts.

When purchasing a property (i.e. you have paid the deposit and exchanged the contracts) you are legally responsible for the new property. If the current tenants/ owners damage the property before you move in or something happens to the property (i.e. storm or flood damage), you will have to pay for repairs.
Having to repair your home if the worst happens can be very expensive and knowing you have the correct cover in place can protect you from this worry.

Next steps

To get more information or to speak to our expert team contact us on 01489 555 080or email us at enquiries@cmme.co.uk 

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    We'd like to send you updates about products and services, promotions, exclusive offers, news and events from CMME by email, SMS, phone and other electronic means. You can unsubscribe at any time by contacting us through email, telephone or post.