Critical illness cover for contractors: a tailored guide

Critical illness cover for independent contractors serves a distinct, standalone financial purpose. It’s neither life insurance nor income protection, but is nonetheless just as essential.

The cover’s primary function is to safeguard the contractor’s lifestyle should they receive a critical illness diagnosis. The effects can be severe, even life-changing. But such a diagnosis shouldn’t carry the gravity such diagnoses once did.

Advances in medical science have significantly increased survival rates for severe medical conditions. So, today, contractors need specialised insurance policies tailored to their unique working patterns.

Determining adequate cover levels

Considering all potential affected dependents is key to determining appropriate critical illness cover. How would your family unit cope with you (and your income) temporarily unable to provide for them?

But it’s not just the direct financial implications of a critical illness diagnosis that’s important. The affected contractor also often needs family to provide substantial support during recovery. So, viewing the scenario holistically will enable the policyholder to take out the correct level of cover.

During this period of significant personal and familial stress, eliminating financial anxiety is critical. No one should be pressuring the contractor to return to work before they’re ready. The luxury of focusing solely on recovery and at leisure will help the situation immeasurably.

Key considerations for policy selection

Consulting experienced protection specialists, like us, will help navigate the complexities of critical illness policies. Our advisors provide crucial insights into policy exclusions and inclusions. Making these informed decisions is key to securing a policy that will work for you.

Contractors must assess the potential impact of a critical illness on their unique lifestyle. Factors to consider potentially include:

• extended periods of being confined to your home;
• intensive rehabilitation programs, often requiring (external) transportation;
• potential modifications to the home to aid mobility and accessibility;
• hiring professional caregivers or childcare;
• increased home energy consumption and entertainment subscriptions;
• the feasibility of resuming current contractual roles post-recovery;
• any financial implications of transitioning to less demanding, lower-paying roles.

A thought-through policy must adequately address these contingencies.

Why a bespoke contractor critical illness policy:

Critical illness policies vary incredibly across insurance providers. And general ‘self-employed’ policies are often not fit for purpose for contractors.

Premium levels often correlate with the scope of the policy. So, it’s important to consider the following factors, too:

• the contractor’s age;
• any occupational risk associated with specific contractual roles;
• personal health and lifestyle choices, including recreational activities and smoking status;
• pertinent family medical history;
• dependents’ financial requirements;
• the policy type, term, and cover amount in relation to role and career trajectory.

Given the unique professional circumstances of independent contractors, policies must address these specific factors.

Ensuring policy adequacy and relevance

Providers offer varying definitions of covered illnesses. With many critical illnesses having recovery periods longer than a year, it’s important to choose the right policy.

Engage with a policy advisor to ensure the chosen policy covers any and all specific needs. This may include disclosing information about pre-existing conditions.

The policy’s objective is to maintain financial stability and lifestyle quality following a critical illness diagnosis. And, yes: higher cover amounts do correlate with increased premiums. But think about it this way: insufficient cover renders the policy all but useless. If it doesn’t cover what you need it to, what’s the point?

Concurrent cover: income protection and critical illness

There is nothing stopping a contractor from taking out income protection and critical illness cover together. It may even be beneficial.

Critical illness recovery periods can extend beyond one year. Receiving a lump-sum critical illness payout and monthly income protection benefits can only be a positive.

The payouts will be contingent upon valid medical documentation. But, together, they provide comprehensive financial security.

Besides the physical aspects, maintaining financial stability is crucial for mental wellness. Being in a good psychological place directly influences physical recovery.

Appropriate critical illness cover can provide the financial umbrella you need during sustained incapacity. Our experienced protection advisors can help you develop such a financial protection strategy.

Recovery is much simpler with the wind behind you than walking headfirst into the storm. Get ready to sail away carefree into your future.