Permanent Health Insurance / Contractor Income Protection (PHI)
All contractors should have permanent health insurance.
As a contractor your income is totally reliant on your ability to show up at the clients site every Monday morning. You lack the employer safety net of ‘sick pay’ that is enjoyed by permies. However, you can replace these benefits through private income protection sometimes called permanent health insurance (PHI).
We only advise contractors and we do like to think that we know our stuff better than a ‘Jack of all trades adviser’. In financial planning terms contractors are pretty uniqu. So, we have sculptured our advice around a thorough understanding of the issues you face.
That is, forexample, the way your paid / potentially unstable markets / IR35 / changing employment status in future / likelihood you may go abroad to work for short time etc.
We have access to a reasonably costed plan that pays out after a single days illness.
Any recommendation on the PHI front specifically is based around a couple of absolutely crucial factor. These will sometimes make the a plan more expensive on the face of it compared to other providers.
However, it ensures that the plan is a very comprehensive one.
Unlike many other areas of a contractors finances where cost is sometimes the only consideration (with life cover you‘re either dead or not so there‘s no way the insurer can wriggle out of paying) with PHI the choice of company is very importan. So, you need to be certain that the policy is watertight in the event of a claim.
Ideally a policy will:
- cover both dividends and salary. Many insurers exclude dividends. Depending on whether your current/next contract is IR35 proof or not this becomes a big issue
- insure even short term contract workers
- cover you on an ‘Own’ not the cheaper ‘Any’ occupation basis. Own occ. protects against an illnesses that stops you from specifically doing what you do now and where you do it. Many policies will suggest that you are fit enough to work in the post room and cut/stop benefit.
- offer guaranteed not reviewable premiums. Otherwise the insurer can, and will, dramatically raise costs in light of future claims experience (CJD?) and price itself out of a liability
- has as few exclusions as possible. Many plans have caveats and clauses that give insurers considerable scope to dodge their obligation. If you are ill the last thing you need is uncertainty or stressful court appearances trying to get what is legitimately yours.
Excellent Claims Record
- must be with an insurer that has a excellent claims record of actually meeting obligations to clients.
- has fair definitions of illness. Where appropriate we favour a policy from an insurer that the British Medical Association use for their own members protection.
- costs inflationary increases (i.e. you benefit increases by RPI each year) on the age that you joined, no matter when the increase is applied. That is, if the extra benefit is actually applied in your 50s you are charged as if you are still your current age! As a contractor, your entire lifestyle rests on the ability to be able to fall back on an income protection policy when you need it. We’ve tried to give an overview of the issues concerning PHI. Please fill in the finder below and we’ll get back to you with some tailored recommendations.