Fanfare for the freelancers

Melanie Bien asks if specialist medical cover is the answer to the self-employed's needs

The most conscientious workers are, not surprisingly, the self-employed. Generally, they have less time off than full-time staff simply because throwing a sickie has an impact on their wallet.

But when flu or serious illness does strike, battling on may not be an option. And if you are self-employed and can't work for weeks, or even months, it could have a devastating effect on your family's finances.

To counteract this, Axa PPP Healthcare has launched Independent Health Cover - medical insurance specifically tailored to the needs of the self-employed. And the policy, which offers personal business assistance and a legal advice line on top of its standard medical cover, is already proving popular.

Personal business assistance is a free service enabling policyholders to stay in touch with phone and email callers when they are off sick or in hospital. It picks up their messages, forwards them on or responds on their behalf to keep their business running while they're indisposed.

The legal line is offered by Axa Assis-tance, a sister company to Axa PPP Healthcare. Policyholders get 24-hour access to advice and information from a team of specialists in consumer, commercial and property law. Topics such as professional negligence, employment law, taxation and personal injury and liability can all be tackled.

And if policyholders are hospitalised, they could receive a cash benefit of up to £1,000 to help with loss of earnings.

The typical benefits you'd expect from such a plan are also offered, including inpatient and day-patient cover, diagnostic tests, outpatient radiotherapy and chemotherapy, and psychiatric cover.

Typical monthly premiums range from £21.85 for a 32-year-old requiring basic cover, to £61.52 for a 52-year-old taking out a fully comprehensive policy. This works out much cheaper than other policies. "The self-employed don't make as many claims as the employed, so this policy is about 7 per cent cheaper than the equivalent for an employed person," says a spokesman for Axa PPP Healthcare. "This makes even more sense when you consider that the self-employed tend to be more savvy than the employed, so are more likely to look around for better rates."

As a rule, private medical insurance providers don't tailor their policies specifically to the needs of the self-employed. Bupa and WPA give discounts on medical cover, but not much more. WPA does offer Flexible Health Freelance, enabling customers to design their own insurance. Policyholders get standard cover and then choose from a number of options that they can add on, including outpatient, therapy and dental cover.

There are some 2.3 million self-employed people, according to the Department of Trade and Industry's Small Business Service, with needs quite different to employees. Staff often receive benefits such as death-in-service payments and permanent health insurance (PHI), also known as income protection. But self-employed people have to make their own provision, which can prove expensive. Anna Bowes at independent financial adviser Chase de Vere recommends taking out life cover before you do anything else, particularly if you have a family. This should be enough to pay off the mortgage, at least.

Rather than opting for private medical cover, Ms Bowes believes it is important to safeguard your earnings first. You need to consider how you would cope if you couldn't work: would you prefer a lump sum, enabling you to give up work completely even if you could carry on, or do you want an income for life? If the former is more important to you, critical illness cover is the answer; if you want the latter, income protection is the answer.

Whether you then go for private medical cover as well is a question of affordability. "If you are ill, you can get treatment on the NHS," says Ms Bowes. "But if you become ill and can't work, while the NHS will treat you, you still won't have an income if you don't have income protection."

A 32-year-old male self-employed writer on £35,000, taking out level benefit to the age of 60 with a six-month deferral period, would pay a monthly premium of £15.36 for income protection from Liverpool Victoria. This would provide cover of £17,500 a year. The most expensive premium is charged by Norwich Union: £28.38 for £21,000 of benefit. To keep down the cost, Ms Bowes recommends building up a cash sum in a savings account.

"The longer the deferment period before you claim on an income protection policy, the lower your premiums will be," she says. "So it is worth amassing enough cash to keep you going for six months or so."

Axa PPP Healthcare, 0800 032 1962.