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Which cover does what?

The seven products below solve different problems, and it is worth being clear which risk each one addresses before comparing prices. Four cover you and your household. Income protection replaces earnings month by month for as long as you are unable to work, regardless of what caused it. Critical illness cover hands over a single capital sum when a diagnosis matches something named in the policy schedule. Life insurance pays a lump sum if you die during the term. Relevant life cover is life cover a company takes out on a director, so the business meets the premium.

The remaining three widen that out. Family income benefit is life cover shaped as a monthly income rather than a lump sum, which suits households whose worry is the monthly shortfall. Private medical insurance buys speed of treatment — for someone with no sick pay, that is really a way of shortening the period their invoicing stops. And business protection covers the company rather than the household: key person, shareholder and loan cover.

The overlap is smaller than the names suggest. Consider a slipped disc that keeps you away from a site for the best part of a year: no insurer lists it as a critical illness, yet your invoicing halts completely. Cover that only responds to named diagnoses would pay nothing at all in that scenario, which is why the two products belong together rather than in competition.

Where most contractors start

Usually with the risk that is both most likely and least covered: being unable to work for a period. Employees have sick pay and, often, an employer holding the role open. A contractor who cannot work simply cannot invoice, and the mortgage carries on regardless.

From there, life cover sized around the mortgage is the common second step, so the household keeps the home in the worst case. Critical illness tends to follow rather than lead, and directors should compare the company-paid route before defaulting to personal cover — the difference in what the same cover effectively costs you can be significant.

Getting the income right on the application

The same question that decides your mortgage decides your cover: what counts as your income. Declare it on the wrong basis — the small salary you draw rather than what the contract actually pays — and you can end up insured for far less than you would lose.

That is a strong reason to arrange protection alongside the mortgage, with someone who already understands how contract income works, rather than filling in a form built around a payslip. Our guides on income protection and life and critical illness cover go into each in depth.