Guaranteed income and/or business interruption insurance: how can you protect yourself and your business?
April 2026 - An accident or illness can suddenly leave any business owner unable to work. For SME owners, this often has twofold consequences: not only is their personal income lost, but the company’s turnover can also come under pressure. Two types of insurance offer a solution to this.
Incapacity for work: an underestimated risk
As an entrepreneur, you are often so focused on your business that you give (too) little thought to what would happen if you were temporarily or long-term unable to work. Yet incapacity for work due to illness or an accident can affect anyone. For the self-employed, this can have serious financial consequences.
When you, as a business owner, are unable to work, in many cases a significant portion of your income is immediately lost. The statutory benefit from the government is usually limited and rarely sufficient to cover all fixed costs, let alone maintain your standard of living. At the same time, your business may also lose income because a key figure is absent.
That is why there are two different insurance solutions: income protection insurance and business interruption insurance. Although both offer protection in the event of incapacity for work, they serve different purposes.
Guaranteed income: protection for yourself
Guaranteed income insurance is primarily designed to protect your personal financial situation. If, as a self-employed person, you are unable to work due to illness or an accident, this insurance provides you with a replacement income.
That income helps you to continue paying your daily expenses and maintain your standard of living. In theory, you can even insure up to the full income you pay yourself, although in practice insurers often apply a limit of around 80 per cent.
The premium for guaranteed income insurance can be paid in various ways. Some self-employed people take out the policy in their own name, whilst others arrange the insurance through their company, for example as part of an Individual Pension Commitment (IPT) or a Voluntary Supplementary Pension for the Self-Employed (VAPZ).
Important to note: with this insurance, you are the beneficiary. The benefit therefore goes directly to you if you become unable to work.
Income protection insurance: protection for your business
Whereas income protection insurance safeguards your personal income, business interruption insurance focuses on the financial stability of your business.
In smaller businesses in particular, the manager often plays a crucial role in commercial activities. If that person is unable to work, it can immediately have a significant impact on turnover. Customer contacts grind to a halt, projects are delayed and new orders fail to materialise.
With turnover insurance, your business can partially mitigate that risk. The company takes out the policy itself and also receives the payout if the insured key person becomes unable to work. This compensation helps to offset the loss of turnover and continue paying running costs – such as wages, rent or suppliers.
Companies can usually insure up to around 60 per cent of the turnover for which the key figure in question is responsible. An additional benefit for business owners is that the premium is fully tax-deductible as a business expense.
A combination offers the best protection
For many SME business owners, it makes sense to combine both types of insurance. Income protection insurance ensures that you are personally financially protected, whilst business interruption insurance ensures that your business does not immediately run into difficulties if you are unable to work.
This dual protection gives you peace of mind and ensures business continuity: you know that your family will retain an income and that your business can continue to operate.
For entrepreneurs who bear daily responsibility for their business and their staff, this is no luxury. On the contrary: it is an essential part of sound risk management.
