How does self-employed sickness insurance work?
When understanding how the policy works, it’s easiest to explain using an example scenario. Take Jason for example, he is an HR consultant who makes a hefty £100,000 a year gross income and £50,000 in dividends, lucky guy. He used our comparison service to find a deal that suited him and took out self-employed sickness insurance for a little more than 50% of his income covering him for a £75,000 lump sum, or £6,250 a month.
His earnings increased the following year, but two years later he is diagnosed with cancer. Jason is out of work for four years, but he is safe in the knowledge that the £6,250, the maximum amount agreed when he took out the policy, is available. If he earned less than the £150,000 the policy was agreed on at the time of the diagnosis, then he would be paid a lesser amount based on his actual earnings.
Jason selected a deferred period of 6 months and received his first payment from the insurer of £6,250 at the end of the 7th month. Over the course of 4 years then, Jason received 42 monthly payments of £6,250 an accumulated total of £262,500. This allowed him to cover his financial obligations and return to work when he was physically fit.