He admits "although this can increase the cost of cover, it prevents someone from ending up in dire straits should they fall ill, even for a relatively short time".
Health and life insurance
Specifically, getting health insurance is "one of the best things you can do if you’re self-employed", according to Mr Smith-Thompson.
Whether this is a form of PMI or critical illness cover (CIC), he says this is a huge benefit "as it means you won’t be waiting in an NHS queue if there’s something preventing you from working".
Mr Conner says that, after IP, if there’s any budget left, Drewberry might get an individual to consider life insurance to protect their loved ones should the worst happen.
He states: "This can also help meet any outstanding debts, such as a mortgage, making sure the family is financially taken care of without that person around.
"It’s also important to remember that many business loans taken out by a sole trader are personally guaranteed, so if they were to pass away it could fall on their family to make repayment, which can make a nightmare situation far worse."
It is important to remember that many adult critical illness policies also make some automatic provision, usually up to £25,000, for children's illnesses, with some exemptions - for example, illnesses diagnosed in utero will not be claimable against on the parent's policy.
Yet according to Scottish Widows research, only 9 per cent of Britons have a critical illness policy - with more people likely to insure their mobile phones, at 12 per cent, than to insure their own lives.
Relevant life and key person cover
According to Martin Stewart, director of London Money, tax planning and financial planning go hand in hand here.
He explains: "Again, using the analogy of their business being a financial planning tool then limited company owners need to be looking at Relevant Life policies as a very efficient way to get cover without incurring a personal financial commitment.
"The state benefits for all people are derisory so ensuring there is a budget at outset for things like income replacement, life cover, critical illness cover, etc, is paramount."
Relevant life policies
Relevant Life policies allow firms to offer a death-in-service benefit to employees, including salaried directors. It is set up by the company and pays out a tax-free, lump sum on the death, or on the diagnosis of a terminal illness, of the person insured.
The proceeds go directly to the employee's family or financial dependants. The following checklist, available from life and pension provider LV=, outlines the pros and cons of relevant life policies.
Key person insurance
Key person insurance (KPI) is cover that will provide a financial safety net for a business if a key member of staff - such as the biggest money-earner or a senior director - dies or is diagnosed with a serious illness (if critical illness cover is also selected).
