Income protection insurance in this context - yay or nay?

bamme89

hi all, I am a company director. I work in digital entertainment, I have a personal brand i.e. one of those annoying social media people (sorry). I am wondering based on the following if I should get income protection insurance or not.

1. If I became disfigured in an accident, or disabled physically, I would not be able to create images and videos, these are what I use to make money.

2. I could technically keep repeating old pictures and videos though. This would result in loss of business income as social media hates repeated content, but it wouldn't bankrupt me.

3. My business has a good reserve, so could technically pay me for say 6 months, even if it was not generating more income.

I assume I'd be wise to keep as much money in the business as possible if it were the case I were to become unable to create new social media content, as I'm not sure how much of a blow this would be to my income based on point 1 and 2, and I'd still have taxes and salaries to pay. So this is a thought I had FOR getting income protection insurance.

However, based on the above, I am not sure how worth it it'd be to pay between £50-250 a month for an insurance policy I would likely (hopefully) not use and wouldn't starve without. My time in my industry is capped by my age. I'd say I have another 5years tops, the likelihood I'd get into an accident or become disabled within 5y, is less than the likelihood if I was in my industry til retirement age.

I'd appreciate any thoughts or anything to bear in mind if I choose to go ahead. Thank you! 

DullGreyGuy

Who are you trying to protect? The company for loss of revenue or yourself as a shareholder for loss of dividends?

Your challenge is point 1, you are not saying that you want to be insured whilst too unwell to work but also that you cannot continue because of disfigurement even if you are physically recovered and fit enough to work otherwise. This probably moves you outside of standard insurance and into bespoke underwriting for which your target premiums are unlikely to support.

To protect the business excluding disfigurement then you'd buy Key Person Insurance (basically AS/PPI for companies). To protect your income then you could buy AS or PHI potentially, just need to make sure they work appropriately for a director/shareholder and the split of income over salary and dividends.  

Weighty1

You have got an unusual situation whereby disfigurement could mean you ARE still able to work but wouldn't necessarily be conducive to producing the content you want.  On that basis, you could also classify yourself in the same category as a model, which for a lot of income protection insurers isn't an occupation they'd want to cover anyway.

Then you've also got the issue of ongoing income.  To claim on an income protection plan you'd need to provide confirmation of loss of earnings so if that's difficult to estimate accurately you could end up paying for a plan which would then be difficult to claim upon due to lack of loss of earnings.

One thing to consider is that there are possibly numeorus things which would prevent you from working and even re-using old content because your mental capacity is no longer up to the job.  Stroke, major head injury, cancer could all affect you from working simply not because you are either not capable of doing your job any more OR not in the mental place of concentrating on your job so I'd still suggest either income protection (if you can work out what the actual loss of earnings would be) or even critical illness cover.

bamme89

DullGreyGuy said:

Who are you trying to protect? The company for loss of revenue or yourself as a shareholder for loss of dividends?

this is an interesting point, I think they are somewhat interlinked in my situation however think the business would suffer a greater loss than I would, my dividends/salary is small compared to the monthly revenue generated overall, and my business could technically still pay me for some time even if my income halved. so perhaps it would be the former actually. I will look into key person insurance, thank you