A quarter of self employed people only have enough money to cover basic costs for three months if they were unable to work
A quarter of the people said they only had enough money to cover costs for three months if they were unable to work, according to life insurance and pensions company, Scottish Widows.
More than two thirds of self-employed Britons do not have a regular income, putting them in a precarious position as costs rise, new research shows.
More than two-thirds of those who are self-employed in the UK were without a regular income and more than half of self-employed workers said they rely on personal savings when they are not working.
A quarter also said they only had enough money to cover rental costs for three months if they were unable to work.
Rose St Louis, protection director at Scottish Widows, urged those who run their own business to seek financial advice.
She pointed out that Scottish Widow’s research also found that almost half of self-employed people see their income fluctuate as a result of owning their own business, with a similar proportion putting this down to being a freelancer, contractor or consultant.
St Louis said not being eligible for Statutory Sick Pay (SSP) can prove a real problem for the self-employed and their financial resilience.
During the pandemic, a fifth of all applications to the Test and Trace Support Payment scheme were from this group, according to a Freedom of Information request by The Community Union. The Community Union represents and supports workers in every sector of the UK economy from steelworkers to office workers to the self-employed.
While many have taken steps to secure financial protection for themselves and their families, 13 per cent of self-employed workers in the UK still don’t have critical illness cover or life insurance.
Of these respondents, just under a third said these forms of protection aren’t a financial priority, one in four said they were prepared to risk not being covered, while a similar amount said they didn’t require these policies or couldn’t afford them.
Ms St Louis added: “When you don’t have an employer to rely on for sickness cover or health insurance, it makes you extremely vulnerable to loss of income or unexpected financial shocks.
“Falling ill or worse, passing away, could place you or your family into real financial difficulty if the right protection cover isn’t in place – such as critical illness or life insurance.
“This highlights how important it is for the self-employed to seek financial advice from a professional, ensuring that not only do they have protection insurance, but that the right policies are in place to help create financial peace of mind for them and those around them.”
Research was carried out online by Opinium Research last October across a total of 2,002 UK adults – including 502 self-employed workers and 1,015 renters.
Protection insurance is an umbrella term and is also known as life insurance, income protection or mortgage insurance. As the name suggests it protects all these things.
Income protection is not to be confused with payment protection policies (PPI) and is also known as permanent health insurance. It pays out a regular income rather than a lump sum if you get an illness or injury that prevents one of you working.
Other protection products include: critical illness cover which pays out a lump sum and can be attached to a life insurance, critical illness cover is a very comprehensive form of protection.
If you are diagnosed with a specified critical illness, then the insurer will pay out the lump sum you have chosen to insure yourself for. The most common claim areas are heart attack, cancer, stroke and permanent disability.
You can include an optional benefit known as total and permanent disability (TPD) which means you are covered if you have a condition that results in total and permanent disability.
The definition of critical illness varies according to the policy and some policies do not include certain types of cancer or long-term illness because they are treatable
A number of insurers have introduced severity based cover as an alternative to traditional critical illness.
It offers coverage based on the severity of your illness or disability. This means you could receive a pay-out at an earlier stage of your illness, even if it is not life threatening.
There are varying levels of severity, which are used to determine the amount of money paid out when you need to make a claim.
This is a shorter term form of income protection cover, but mortgage payment protection insurance, can include clauses to exclude previous and existing conditions.