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IR35 Insurance - Protect yourself from financial uncertainty

February 14th, 2020

In the run up to IR35, many Contractors are asking themselves if they should sort out financial protection now, or wait to see the fall-out of IR35.  The bottom line is that the financial security of you and your family is likely your number one priority and therefore, having a plan in place is critical, regardless of the impact of IR35 and how you may choose to work in the future.

Should I protect myself now or wait to see the impact of IR35?

IR35 is impacting many contractors, some of whom are still uncertain what their employment status will be post-April 2020.

Generally, you may be affected if you are:

  • a worker who provides their services through their intermediary
  • a client who receives services from a worker through their intermediary
  • an agency providing workers’ services through their intermediary

Full details on IR35 can be found on the government website 

However, just because your employment status is up in the air, your financial protection doesn’t have to be.

There are still plenty of options for you in terms of protection and this doesn’t have any bearing on the type of employment you have. As a specialist mortgage, protection and wealth management service, we have broken down the possible options for you.

INCOME PROTECTION

Employers will offer a sick pay benefit which will pay out for up to six months, maybe longer if you are lucky, after which time you are reliant on statutory sick pay (£94.25 per week for up to 28 weeks). For many families, this is not enough, not even close to what they need. Infact, the average payout period for income protection in 2018 was 6 years according to LV*

*https://www.lv.com/lifeassets/assets/documents/claims-brochure-performance.pdf

Income Protection removes the risk of a financial shortfall.  It’s something you can put in place and rely on no matter what your employment situation, whether that be LTD Company Contractor, Umbrella Contractor or Permanently Employed. Moreover, should you decide to needs and change employment status in the future, due to IR35 or any other reason, your protection policy can be simply tweaked to suit your needs as they change.  So there really is no need to delay putting plans in place and in fact a lot to gain from the additional peace of mind in an ever changing world.

Benefits of income protection:

  • On average a longer term is paid for sickness
  • Can cover you as a limited company contractor, umbrella or permanently employed
  • Indefinite income for however long you are unable to work due to sickness or illness
  • You can claim as often as you need to as long as the policy is open

Income Protection can help you and your family maintain a standard of living by providing an income if you are unable to work due to a sickness or injury. This is indefinite, meaning IR35 insurance income will last as long as you are unable to do your occupation, and will be there as many times as you need it during your working life. Aviva claims statistics from 2018 tell us that over 67% of people claiming on Income Protection were over the age of 40 at the time of the claim.

RELEVANT LIFE COVER

Planning your family’s financial future without you is not a nice thought however we can provide our expertise and experience to give you peace of mind they will be protected.

If you are an LTD Company Contractor, the good news is that premiums can be paid by the business. Generally, employers will provide ‘Death in Service’ coverage of four or five times your annual salary. Relevant Life Cover can protect up to 25x your annual income and the benefit is tax-free.

You can also find a guide on the protection cover offered by CMME here

Don’t lose the cover you already have

Many Contractors are closing their LTD Companies as a result of IR35, if your status is to change in the future you do not have to lose the cover.

With most insurers, this can be taken forward as a personal plan and is straightforward to change. If you require assistance with this, please do not hesitate to contact us.

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