This article provides an overview of Permanent Health Insurance (PHI) - income protection cover for IT Contractors.

We have worked with the Contractor Financials team since 2000. As IT Contractor specialists, they can provide you with PHI quotes tailored to your personal circumstances. If you would like a quote, simply fill out the Income Protection form at the end of the article, and the team will be in touch shortly.

Overview of Income Protection

Unlike permanent employees, who are usually provided with several months salary if they become ill, or have an accident, IT contractors are completely responsible for their own financial well-being any time they are forced to have off from work due to illness.

Income Protection/Permanent Health Insurance policies redress the balance. Once you set up and make payments towards a PHI policy, you will be supported financially if you are unable to work. IT Contractors can choose to pay for income protection policies themselves, or via their limited companies

Personally funded plans pay benefits tax free whereas premiums paid by the company are taxable as a benefit in kind but the monthly premiums you pay are viewed as 'legitimate business expenses' and so can be offset against corporation tax.

How Income Protection Works

Depending on the policy taken out (and the monthly premium), a PHI company will pay out a proportion of your income after a 'deferred' period has expired.

This deferred period is simply a pre-agreed waiting period (typically between four weeks and a year). As you would expect, the longer the waiting period, the lower the premiums for cover.

Clearly, if you have savings and would be able to cover your expenses for several months in the event of illness or an accident, you may be better off electing to have a longer waiting period, as your monthly premiums would be lower.

You may wish to cover up to 75% of your income. Naturally, the higher the level of cover you take out, the higher the monthly premiums with be. It is essential that you calculate a realistic level of cover to protect you and any dependants if you can't work. Make sure that your financial advisor is an IT contractor specialist, as the nature of the industry we are in has it's own characteristics and uncertainties. They will be able to tailor a policy to your exact requirements, knowing fully how IT contracting works.

Income Protection Tips

- Make sure the PHI company has a good record of meeting past claims, as payment delays can be very stressful. An experienced IT Contractor financial advisor will have personal experience of a number of companies and will be able to recommend a good selection.

- Ensure that the policy will pay out if you cannot carry out your stated occupation (e.g. as a programmer), as less contractor friendly cover may insist that you can carry out a menial job despite being ill... even if you're unable to work as a programmer. The cover should reflect the fact that you need cover as a skilled IT person.

- Make sure your PHI policy covers you until your chosen retirement date (60 or 65 usually). You would expect a policy to cover you up to the date your pension starts to pay out.

- Make sure you inflation proof your benefit level. £3000 per month in 20 years time will be worth far less! You can ensure the insured levels increase by an agreed amount each year - either a fixed percentage, or in relation to the Retail Price Index.

Contractor Income Protection Quote Request