Income Protection for the Self-Employed in Ireland (Sole Traders)

If you’re self-employed, you already know the deal:

No sick pay.

No HR department.

No one quietly keeping things ticking over while you recover.

If you can’t work, your income stops but the bills don’t.

That’s why income protection matters more when you’re self-employed than it ever does for PAYE employees.

Why income protection matters more when you work for yourself

When you’re employed, illness is inconvenient.

When you’re self-employed, it’s financially dangerous.

You don’t get employer sick pay, state supports are limited and slow and the invalidity pension is not a realistic fallback for most people.

In plain English: if you’re out of action for more than a few weeks, the pressure ramps up fast.

Income protection exists to remove that pressure so you can focus on getting better, not panicking about money.

How self-employed income protection works

At its core, income protection is simple.

If illness or injury stops you doing your job, the insurer pays you a monthly income.

That income continues until you’re back at work or until your policy ends.

A few things that matter more than people realise:

– It covers any illness or injury, not just serious ones
– It’s based on your occupation, not “any job”
– You can claim more than once over your lifetime
– If you relapse within 6 months, you don’t re-serve the waiting period

This isn’t short-term “bill cover”.

It’s long-term income replacement.

The two rules people get wrong (and pay for later)

Rule one: what you can actually insure

If you’re self-employed, insurers don’t look at drawings.

They look at profits.

You can insure up to 75% of your taxable profits.

As a sole trader or contractor, there’s no state illness benefit to offset so you can insure the full 75%.

Trying to insure drawings is one of the most common (and expensive) mistakes we see.

Rule two: when income is checked

Your income isn’t checked when you apply.

It’s checked when you claim.

At that point, the insurer will look at your accounts and apply their averaging rules.

Some insurers look back 12 months. Others average over three years.

If your income fluctuates, choosing the wrong insurer can materially reduce your payout.

If you’re a contractor, this is how insurers see you

Rolling contracts are fine.

Six-month contracts are fine.

As far as insurers are concerned, if you’re working continuously on a self-employed basis, you’re treated as permanently self-employed.

If you’re newly contracting, insurers will work off expected income, but claims in the first year are assessed carefully.

If income rises, you should increase cover. If it falls, you should reduce it.

Small business owners and fluctuating income

If your profits move around from year to year, this matters.

Some insurers offer a confirmed income option, where you prove income upfront and lock it in.

Others will average your earnings at claim stage.

Choosing the right approach depends on how stable your business is and where you expect it to go.

This is one of those areas where advice actually makes a difference.

Waiting periods and affordability

Income protection doesn’t pay immediately.

You choose a deferred period of 4, 8, 13, 26 or 52 weeks.

The longer the deferral, the cheaper the premium.

13–26 weeks is the most common balance between affordability and realism.

For employed people, 26 weeks often works because they have sick pay or state illness benefit.

For the self-employed, 13 weeks is usually more realistic because there’s no state support safety net to fall back on.

Hospitalisation benefit (important if you’re self-employed)

This one is often missed.

If you’re hospitalised for more than seven days, most insurers will start paying immediately, without waiting for your deferred period.

Zurich is the exception — they trigger after three days.

Once triggered, insurers pay a daily benefit (1/365th of your annual cover) while you’re in hospital.

For self-employed people, this can be a crucial safety net.

This benefit only applies while you’re an inpatient.

Health, exclusions and underwriting reality

Pre-existing conditions don’t usually cause blanket declines.

They lead to exclusions or premium loadings.

The bigger risk is applying to the wrong insurer first.

Underwriting decisions must be disclosed forever so if Insurer A excludes an illness from your policy, you have to tell Insurer B when you apply.

This is why sequencing matters, especially if your medical history isn’t straightforward.

What actually happens if you need to claim

You notify the insurer once it’s clear you’ll be out of work longer than the deferred period.

They’ll ask for medical certification and financial evidence.

Once accepted, payments are made monthly, directly to you.

Tax treatment (personal policies only)

As a sole trader or contractor, you pay premiums personally.

You can claim tax relief at your marginal rate.

Claim payouts are taxable as income. This is because they’re replacing earnings, not paying a lump sum.

If your company pays the premiums, that’s Executive Income Protection and sits outside this page

Next steps

If your income is irregular, your health is complex, or you’re unsure how insurers will assess you, don’t apply blind.

The safest next step is to complete our income protection questionnaire so we can guide the process properly.

👉 Complete our income protection questionnaire
👉 Book a callback

Thanks for reading

Nick

Editor’s note: This article was originally published in 2017 and has been reviewed and updated in 2026 to reflect how income protection for the self-employed works in Ireland today, including current underwriting practices and insurer rules.