Why Self-Employed People Need CIC
If you are employed and diagnosed with cancer, your employer’s sick pay keeps your income going while you recover. When you are self-employed, your income stops the moment you stop working.
Critical illness cover pays a tax-free lump sum – typically £50,000 to £500,000 – on diagnosis of a covered condition. This money can:
- Replace lost business income during treatment and recovery
- Pay your mortgage, bills, and family expenses
- Fund private medical treatment for faster recovery
- Cover business overheads (rent, staff) while you are unable to work
- Pay for adaptations to your home or business premises
CIC vs Income Protection for the Self-Employed
| Feature | Critical Illness Cover | Income Protection |
|---|---|---|
| Payout type | One-off lump sum | Monthly income |
| Trigger | Diagnosis of specific condition | Unable to work for any medical reason |
| Duration | Single payment | Ongoing until recovery or retirement |
| Best for | Mortgage clearance, treatment costs | Replacing monthly income |
Ideally, self-employed people should have both. CIC provides a large lump sum for immediate needs, while income protection provides ongoing monthly income until you can work again.
How Much CIC Do Self-Employed People Need?
- Minimum: Enough to clear your mortgage
- Better: Mortgage + 1–2 years of business income
- Comprehensive: Mortgage + 2–3 years of income + treatment costs
Tax Treatment
CIC premiums paid personally are not tax deductible (you pay from post-tax income). However, the payout is completely tax-free – you receive the full amount with no income tax, capital gains tax, or National Insurance to pay.
Frequently Asked Questions
Yes, arguably more than employed people. No employer safety net. CIC is a vital lifeline.
No, premiums are post-tax. But the payout is completely tax-free.