A far more realistic scenario than you unexpectedly dying involves you being injured or contracting an illness that prevents you from earning a living as a self-employed landscaper. If for some reason you find you aren’t able to work for an extended period of time you’ll lose your income and if your income is the only one coming into the family home then you may quickly find yourself in financial trouble. Savings and other sources of finance will help to pay your bills for a while but ultimately you’ll have to create another source of income, and this may mean working as something other than a landscaper.
An income protection insurance policy can be bought to cover this scenario though. This type of policy pays you a percentage of your average working income while you are unable to work due to injury or illness. The percentage paid depends on the specifics of your policy but it can be up to 75% of your average monthly income.
One thing to consider when choosing an income protection policy is the way in which your monthly payment is calculated. Most insurance companies take an average of the amount you earned in the 12 months prior to you making a claim. So for example if your financial statements say you earned $36,000 in the year before you were injured or became ill then your average monthly earnings would be calculated as $3000. A policy that pays 75% of your earnings would therefore give you $2250 per month for living expenses.
Be aware though that if you have a bad business year you could end up with a policy that doesn’t pay enough to comfortably live on.
If you don’t mind paying slightly higher premiums it is sometimes possible to find insurers that are willing to underwrite a policy that pays an agreed amount each month regardless of your yearly earnings. This means that if you have a bad year with your landscaping business it doesn’t mean you’ll have a poor pay-out from your income protection policy should you make a claim.