Why protection matters more when self-employed
Employees often have death-in-service and sick pay; the self-employed have neither. The best protection setup replaces that safety net — covering your family if you die, and your income if illness stops you working. The right mix depends on whether you trade as a sole trader or limited company.
1. Personal life insurance (term)
Straightforward cover paying a lump sum if you die within the term — to clear a mortgage or support your family. Best for all self-employed people as a foundation. Level or decreasing term depending on the need.
2. Relevant life cover (for company directors)
A tax-efficient, employer-paid death-in-service style policy for directors of limited companies — premiums are usually a business expense and not a benefit in kind. Best for limited company directors wanting cost-effective personal cover paid through the business.
3. Income protection
Pays a regular income if illness or injury stops you working — arguably the most important cover for the self-employed, who have no sick pay. Best for anyone whose household relies on their ability to keep working. See our income protection for the self-employed guide.
4. Critical illness cover
A lump sum on diagnosis of a serious illness, helping cover lost income and extra costs while you recover. Best added alongside life and income cover for fuller protection.
5. Business protection
If others depend on your business (partners, key staff, loans), key person and partnership protection keep it running. Best for established businesses with dependants beyond your household.
Building your protection
- Foundation: personal term life insurance (or relevant life if a director)
- Most important: income protection — you have no sick pay
- Added resilience: critical illness cover
- Business continuity: key person/partnership protection
How to find the best cover
A protection specialist can build a tax-efficient, whole-of-market plan around how you trade. Find a protection specialist through Nesto — free, no obligation.
Frequently asked questions
What protection do the self-employed need most?
Income protection is often the priority, since you have no employer sick pay, alongside life cover for your family.
What is relevant life cover?
A tax-efficient life policy for limited company directors, paid by the business, usually treated as a business expense and not a benefit in kind.
Can sole traders get tax relief on life insurance?
Generally no for ordinary life cover. Some income protection and relevant life arrangements have tax advantages — take advice.
Do I need business protection?
If partners, key staff or business loans depend on you, yes — key person and partnership protection keep the business viable.
How much cover do I need?
Enough to clear debts, replace income and cover your family's needs. A specialist will help you calculate it.