How can insurance ensure that your income is protected while you're self-employed?

Is a loss of income inevitable?

Until March 2020, Portugal was unanimously cited as a success story in the aftermath of the 2008 economic crisis. For the first time in our history, we had a budget surplus, the unemployment rate was steadily declining, and we were seeing a return of the income that had been seized by the Troika.
The general mood was one of optimism, and no one thought a virus was on its way to ruin everything. The truth is that’s exactly what happened, and with one lockdown after another, the measures to control the pandemic hit the financial well-being of citizens and businesses like a bomb.
While successive layoffs cut workers’ disposable income by about 30% and allowed numerous companies to survive, as the pandemic continued to affect our lives, the situation deteriorated, leading to the closure of thousands of businesses and, consequently, layoffs.

The pandemic has resulted in a substantial loss of income for the Portuguese population

According to a study by the BPI Social Observatory and the “La Caixa” Foundation on the impact of COVID-19 on poverty and inequality in Portugal, the pandemic resulted in a substantial loss of income for the Portuguese population, even with the implementation of anti-crisis policies in 2020.
Thus, this study estimates that the median annual equivalent income, adjusted for household size and composition, fell from 10,100 euros in the no-crisis scenario to 9,100 euros in the crisis scenario, representing a loss of 7% in median annual income.

When compared to a scenario without a pandemic, approximately 400,000 people fell below the poverty line—defined as 60% of the median equivalent income—increasing the at-risk-of-poverty rate by 25% as a result of the crisis caused by the spread of COVID-19.

Noting that some of these thousands of people were already living on the poverty line in 2019, the Observatory notes that the crisis not only led to an increase in inequality but also had asymmetrical effects depending on the social class, region of origin, and level of education of those affected. Consequently, the lower and lower-middle classes, the Algarve region, and people with an education level up to the ninth grade were the groups most affected by this crisis, with losses clearly above the national average.

It is worth noting, as we mentioned, that the extraordinary protective policies implemented by the Portuguese government in 2020 managed to partially mitigate the rise in poverty and inequality. Without these measures, the study states, the initial eight-week lockdown would have had approximately the same impact on poverty and inequality as that calculated for an entire year.
Let’s return to the question in the title: Is this loss of income inevitable? According to EXS, a leading national insurance brokerage firm that excels in service quality and innovation across the various sectors of the insurance industry, the answer is a resounding no.

Income Protection Insurance: The antidote to loss of income

Intended for self-employed individuals, independent professionals, and employees who receive variable compensation—such as doctors, lawyers, managers, executives, or architects—the Income Protection Insurance – income protection plan – is, as the name suggests, a solution that provides comprehensive coverage for any eventuality that may arise in these workers’ lives and prevent them from earning their expected income.

Among other things, the Income Protection Insurance It offers a guaranteed monthly income for up to two years in the event of temporary disability due to illness or accident, high compensation in the event of death or permanent disability due to an accident, and is valid 24 hours a day, 365 days a year worldwide, with coverage extended to age 75 and waiting periods ranging from 30 days (in the case of illness) to 18 months (in the case of pre-delivery complications).
Although COVID-19 is the main concern these days, it is important not to forget that the care of non-COVID patients has been significantly disrupted, resulting in significant delays in the detection and treatment of diseases that are extremely prevalent in Portugal, such as diabetes (which affects 10% of the Portuguese population between the ages of 25 and 74), stroke (accounting for 20,000 hospitalizations), and hypertension (a cardiovascular risk factor affecting 36% of Portuguese people between the ages of 25 and 74).

All of these illnesses can ultimately lead to relatively long periods of disability and an increase in the accident rate, which in turn result in a loss of income.
To help you prepare for this type of situation, the Income Protection Insurance guarantees payment of the contracted monthly income—or its equivalent—for the number of days of verified disability, starting on the 4th day in the event of an accident or on the 12th day in the event of illness.

In addition to this, this safe automatically covers special risks, such as:

• Participation in all types of amateur sports: winter sports, extreme sports, soccer, etc.; provided it is occasional and not organized through a sports federation;
• Use of all types of aircraft;
• Driving vehicles with two or more wheels;
• Diseases resulting from pandemics and epidemics;
• War, Terrorism, Nuclear, Biological, and Chemical Threats;
• Pre-Delivery Complications;
• Geographic Scope: Worldwide.