Thursday 17 April 2014

Self-employed face protection ‘gap’ risk

An increasing number of people have become self-employed in recent years. If you are among them, you may have found the switch has left you without the employment benefits you previously took for granted.


Between 2008 and 2012, the number of people whose main job was self-employed rose by 367,000. Sixty per cent of this increase occurred between 2011 and 2012 – a possible result of the recession. The number of self-employed people in the UK now stands at 4.37 million, representing 14.5% of the working population.

Making the change from being employed to self-employed is clearly a big step – and it’s one more people are taking. But while some may find their income rises, it can be easy to forget about replacing lost employee benefits including sick pay and life insurance.

Lost employee benefits


Many employed people automatically benefit from life insurance, arranged on their behalf by their employer. This would pay a multiple of their annual salary were they to die, which could then be used to pay off a mortgage or provide funds to support their family in the future.

They may have also received a proportion of their salary for a period of time (that exceeded the statutory sick pay levels) if they were unable to work due to illness or injury, and benefitted from access to private medical treatment. Clearly moving from employment to self-employment would mean these benefits cease, potentially leaving a protection ‘gap’.

Plugging the protection ‘gap’


Fortunately, the insurance cover you may have benefited from as an employee is also available to you as a self-employed individual – and it may be more affordable than you think. 

Income protection insurance will pay you a monthly income to cover your living expenses should you be unable to work through illness or injury, and should be considered an essential piece of protection. It can help prevent your family suffering financial hardship, and help you recover more quickly without the burden of financial worry. Many insurance companies also provide support for customers to help them
return to fitness as quickly as possible.

A life and critical illness plan will pay either a tax-free lump sum or a regular income should you suffer a serious illness, or die, and can help secure your family’s financial future.

Private medical insurance may be considered less of a priority than either income protection or life insurance, given the treatment you are entitled to from the NHS.

For those seeking to replicate all the benefits they may have enjoyed when employed, there are a range of policies available at varying price levels.

Are you covered?


If you are self-employed, it is easy to ensure that your employment status doesn’t put your long-term financial security – and that of your family – at risk.

To discuss your protection needs, speak to your financial adviser.

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