As safeguards for contractor finances go, permanent health insurance (PHI) is without doubt the most important of the contractor insurances out there. If you’ve recently left the world of salaried employment for the greater flexibility and, hopefully, increased earnings that contracting has to offer, you must remember that you’ve also left behind the inbuilt health cover which pays you a full salary whilst you’re recovering from an injury or illness, often for up to several months. As a contractor, you’re completely responsible for your own income even when you’re unable to work – hence the critical importance of income protection in the form of permanent health insurance.
Contractors can either pay contributions to an income protection policy as individuals or via their Ltd Companies, but take note of a few swings and roundabouts. Personally funded schemes are tax free, but you’ll be able to claim monthly premiums paid via your company as ‘legitimate business expenses’ to be offset against corporation tax.
Here are a few pointers on how to choose a good PHI. Unless you’ve had a solid recommendation, consult an experienced contractor financial advisor first – he or she will have had dealings with several PHI companies and will be able to advise you on which of them have a good track record when it comes to paying past claims (and covering you until your chosen retirement age). The last thing you need when you’re unwell is the stress of delayed payment. And beware low cost policies – you may find that, if you can’t carry out your contractor role, you’ll be expected to carry out a more menial function while you’re recovering. So, don’t forget to read the small print.
