CIS Income Protection
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CIS Income Protection
David Sharpstone talks to us about income protection for CIS workers.
Podcast approved by The Openwork Partnership on 05/12/2025.
Can CIS workers get income protection? How does it work?
Income protection for CIS workers is so important, because these guys and girls have no employer benefits. If they, God forbid, fall off a scaffold or have an accident on site – or even if they trip over their kids’ toys and they can’t work, they will have no income coming in because they’re self-employed.
If you’re self-employed and you’ve got a mortgage, or even if you just rent, you need some backup. I advise all my clients to have income protection, which does exactly what it says on the tin – it protects your income.
If you’re out of work, the insurance company will give an income every month for a period of time. It’s tailored to the individual client.
Can my CIS payslips or HMRC statements be used to prove income for a policy?
If you’ve got an income protection policy, the amount it pays out is always based on when you make the claim. Let’s say, for example, you’re earning £20,000 a year and 12 months on, your income drops to £5,000 a year. If you make a claim when you’ve only earned £5,000, no insurance company will pay out based on the £20,000 you used to earn.
They also ask you to prove what you’ve earned, and there are two different ways to do that as a CIS worker. One is to show your profit on your HMRC statements, and the other is your CIS payment and deduction statements. Which one you need will depend on the insurance company.
Using your CIS payslips to do it is a much better way. I try to focus on insurance providers that do that – it means my client can get income protection based on what they’re really earning, rather than the amount after expenses.
What percentage of my income would the policy typically cover if I can’t work?
It will vary from provider to provider, but the range is between 60% to 65% of your gross income, as a maximum.
If you’re sitting at home getting paid from an insurance company at 65% of your gross income – which is probably around 80% of your net income – you might not be that motivated to go back to lugging bricks around a building site all day.
I think insurance companies do worry about motivating you to go back to work as quickly as possible. That’s why they limit it. Everybody wants you to receive all your normal income, get back on your feet and get all the bills paid.
How long is the waiting period before the income protection payments start?
It does differ for construction workers. If you were doing a desk job, an insurance company could potentially pay out every month from the minute you make the claim. However, for construction workers, almost every insurance company has a four-week minimum waiting period, also called ‘the deferred period’.
The reason is that there are so many little accidents on site – it’s slightly higher risk, with more chance of you making a claim. But you could potentially return to work in those first four weeks.
So I always tell my clients to make sure you’ve got a buffer to cover at least one month’s outgoings, including your mortgage or rent. Have that there in savings, because an insurance company isn’t going to cover you for the first month.
Are there insurers that specialise in policies for CIS contractors specifically?
I wouldn’t exactly call them specialists, but some insurance companies can use the CIS payment and deduction statements to evidence the higher income earned. That’s definitely the better way to do it.
Some companies potentially ignore the profit figures and rely on the CIS payment deduction statements for that claim, which are easier to get hold of and potentially give you a bigger payout.
Can the policy cover both short-term and long-term loss of income?
Absolutely. My recommendation is to protect your income all the way up until retirement. If somebody puts their back out and never returns to work – which has to be confirmed in a doctor’s letter every six months – potentially an insurance company can pay out until they retire.
Insurance companies do offer alternatives that are cheaper on premiums, but instead of paying out all the way up to retirement, they stop paying out after one, two or five years. It just depends on the policy and the terms that we pick.
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Are there exclusions specific to construction or contracting work?
They do come up. The first is working at depth underwater. Some construction workers come to me for a mortgage as deep sea divers, doing construction projects in a dive suit. That could be excluded.
Anybody working with explosives or in demolition might also find it very difficult to get cover. And the same if you’re working at height for most of the day. You might be a scaffolder or you hang off the side of a building – usually the threshold is over five storeys or 40 feet.
How is my monthly benefit calculated given fluctuating income?
When I’m giving advice on this, we look at the income earned in the last year. Normally we look at the gross CIS income earned in the last 12 months. Otherwise, we revert to the tax calculations or SA302s and work out what the maximum benefit is.
If you earned £10,000 a year, typically the maximum benefit per year would be £6,000 to £6,500. But at the point of claim, the insurance company will always ask for current evidence of income. If your income has gone up, they’re not going to increase the amount of benefit – because you haven’t paid for it.
But at the same time if your income has gone down, even if you have paid all your premiums, they’ll still only cover you for 60% to 65% based on your last 12 months. That’s really important. I always advise my clients to check their income every year. I always review your policy annually to make sure it’s still in line with what you’ve earned. Is it still suitable to cover your income or do we need to take it up or down?
Can I include additional benefits such as redundancy or critical illness cover in my policy?
Not redundancy, because nobody’s going to cover you for being out of work if you’re a self-employed CIS worker.
But we can include critical illness cover, and I’m a big believer in that. If you’ve got a mortgage, you need to ensure you’re financially resilient. God forbid you get cancer or another serious illness… so, where affordable, I advise including critical illness cover as an addition to sick pay cover.
One will pay off the mortgage and the other will ensure that your monthly bills are still paid. You’re not going to be forced out of your home.
How do annual fluctuations in my income affect premiums or coverage?
If you’re paid through the CIS scheme and you have annual fluctuations, it has no bearing on the premium you pay. The premium is linked to the amount of cover you want, which is based on your last 12 months of income.
A fluctuation between this year and the last wouldn’t really make a lot of difference. We’ll always base it on your last year, anyway.
Is it better to take a fixed benefit or a percentage of my average income as a CIS worker?
There are two cover options. One insurance company’s policy will pay out a benefit of £1,500 guaranteed. It doesn’t matter whether your income goes up or goes down. It’s designed to cover your living costs.
The other option is to have a benefit linked directly to your income. So if you’re earning a gross income of £100,000 a year, it could give you £60,000 to £65,000 pounds every year. Of course, the more cover you have, the more you’ll be paying on the monthly premiums.
Everybody’s got different situations and budgets. It’s about bespoking the right package for mortgage protection and income protection for the individual – so there isn’t one right answer here.
Can I adjust my cover if my contract’s income increases or decreases?
I always recommend a regular review of all insurances, but in particular income protection. Income for the self-employed does go up and down, so we need to check that it meets your needs.
If your income has gone up year on year, you can increase the benefit. Likewise, if your income has gone down and you feel overinsured, you can decrease the benefit.
Will insurers consider my work history or length of CIS contracts when assessing risk?
One of the questions that insurers normally ask is ‘do you work for more than 16 hours a week’? But construction workers often work 60 or 70 hours a week, so that’s quite achievable.
Another question is ‘have you been in continuous employment for six months?’ It could also be 12 months or even two years. It depends on the provider. Work history doesn’t necessarily have to be evidenced at the point of application, but at the point of claim, it certainly comes up.
What else do we need to know about income protection for CIS workers?
Getting the right advice is an absolute must for a CIS construction worker. There are so many different types of income protection, and you don’t want to have taken advice from somebody who’s not an expert.
You might think you’re covered for something and then when you need the cover, they won’t pay out because you didn’t get the right advice. Or, perhaps you tried to do it yourself on a comparison website. Maybe you didn’t understand the small print and you now find you’ve paid for something that isn’t suitable to cover you.
Getting expert advice from somebody like myself will avoid all that – it’s an absolute must.
Key Takeaways:
- Income protection is vital for self-employed CIS workers, providing financial backup for bills, rent, or mortgage if they cannot work due to accident or illness.
- The amount paid out is based on your income at the point of claim. Using CIS payment and deduction statements is generally the better way to prove income, as some insurers use this to evidence a higher income earned compared to profit figures on HMRC statements.
- Policies cover a maximum of 60% to 65% of gross income to help motivate a return to work.
- Construction workers have a minimum four-week ‘deferred period’ before payments start; therefore it is advisable to have a one-month savings buffer.
- Redundancy cover is not available, but critical illness cover can be added to help pay off a mortgage in case of serious illness.
Approved by The Openwork Partnership on 05/12/2025.
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