Why self-employed workers need life insurance

Friday, 14 January 2011 11:08

According to new research by the independent financial advisor website Unbiased.co.uk, there has been a rise in demand for life insurance during 2010. The survey found that there has been a 39% rise in online search enquiries by consumers looking for protection products such as life insurance since the beginning of the year. Searches for group protection had also risen by 86%. So people are taking life insurance more seriously, but there is one group of people that seem to be missing out, and that's the self-employed.

No protection plan

Scottish Provident has found that, despite the rise in demand for life insurance policies, an astonishing 58% of people still do not have any protection plan in place, and among that number the self-employed are poorly represented. Anyone who is self-employed knows that statutory sick pay and holiday pay are two of the financial sacrifices you have to make when deciding to work for yourself. If the worst happens the impact on your income is immediate and can be devastating, even if you only suffer a minor illness or injury. If your business depends on you working 24/7, particularly if you are a one-person company, then the result could be financial hardship for you and your family.

Leaving your family without a financial safety net

One of the most common reasons stated for not taking out life insurance is the cost, with 39% of respondents to the Scottish Provident survey citing price and affordability as their main reason for not taking out a policy. But with life insurance policies now available for just a few pence a day this could be a false economy, particularly for the self-employed. Life insurance provides you and your family with a financial safety net that in the event of a major incident could mean the difference between maintaining the mortgage or rent payments and struggling to keep a roof over your head.

There also seems to be a lack of awareness about the types of policies available, according to industry watchdogs. Not all life insurance policies only pay out in the event of a death. Many now include serious injury or illness provisions that can pay out a smaller amount if you are incapacitated for any length of time. If you are self-employed this could make a huge difference to your ability to continue with the business once you get back on your feet. If bills and invoices remain unpaid due to your inability to work through injury or illness then it could be very difficult to get back on track once you recover. By taking out a life insurance policy that includes serious illness or injury cover, those invoices and bills could be paid on time, making it much easier to keep your business going while you recover.

Income protection

Another policy option is income protection. Your outgoings and bills don't stop just because your income does. Without income protection you may have to resort to expensive loans or even borrowing money from friends and family just to keep going. Income Protection is specifically designed to help you protect your financial commitments by paying you a monthly allowance from the policy to cover bills and day to day costs. The monthly payments also have the added advantage of being tax-free under current tax rules.

So if you're currently self-employed and your tax affairs are all in order, why leave your financial security to chance? Life insurance is a vital aspect of modern life and unfortunately the worst does sometimes happen. Protecting yourself and your family could cost you just a few pence a day. Compared to the devastating impact a prolonged inability to work could have on your finances, it seems a small price to pay for peace of mind.

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