Earlier in 2020, research published by The Exeter and Cebr revealed that 1 in 5 self-employed people in the UK don’t have any savings to fall back on if they experience a financial crisis. Less than 1 in 10 (9%) self-employed people protect their income, however more than 50% of people asked said they would rely on savings if they had to, but many were only saving up to £50 per month.
There are more than 5 million self-employed people in the UK, of all ages and professions. Sometimes referred to as ‘the gig economy’, self-employment is on the rise and it is not just millennials taking advantage of the benefits of more flexible working.
Many people that are self-employed are also needing to support a family and yet the 35-45 age group have the least income protection in place, as found by The Exeter’s survey.
Why do I need income protection?
When you are self-employed, you will not be able to rely on statutory sick pay if you need to take time off work due to illness, injury. Another factor to consider is contracts falling through, for example, as has unfortunately been the case this year when businesses have been impacted by Covid 19.
Many people are hesitant to take out protection insurance on their income and often say things like “I hardly ever take time off…”, “my partner’s income will cover us…”, “state benefits will be sufficient…” or “I will just sell up and down size…” – but none of these reasons are enough of an excuse to not have income protection insurance.
The likelihood is that many self-employed people will struggle if they lose part or all of their income, which has never been more evident than in 2020 where 2.7 million self-employed people in the UK (more than half the total number of self-employed people) claimed a grant through the governments Self-Employment Income Support Scheme.
It is vital that you have some form of protection in place, so that you can have peace of mind and financial security for the future in case the worst should happen.
What is income protection insurance?
There are various types of income protection insurance and which one you choose depends on your personal circumstances. Income protection will usually cover around 50-60% of your normal income and payments are sometimes deferred between taking time off and claiming on your policy, so you may also need to rely on savings during this time too.
- Long term income protection – will cover you for a long period of illness or injury, such as a ‘Permanent Health Insurance’ policy, not to be confused with Private Health Insurance.
- Short term income protection (STIP) – is an option favoured by many self-employed people as they are generally cheaper and can last between 6 months and 2 years, meaning they are more flexible policies too.
- Critical illness cover – this is a different type of cover which would provide a lump sum pay-out if you were to develop a serious illness such as cancer.
- Life insurance – a policy that anyone taking out a mortgage should consider, especially if you have a family and want to be prepared for every eventuality.
Can I take out more than one income protection policy?
You can take out more than one policy at a time, as most different policies are suitable for different times and circumstances. So, a policy that protects you for illness or injury, may not cover you if you lose your job, for example.
Are you self-employed and in need of advice on income protection?
The expert team at Choice Mortgage Solutions can help you to find the best income protection policies to suit your circumstances, whether you are self-employed, employed, part-time or full-time. Navigating the income protection market does not have to be challenging – we are here to help. Get in touch with our teams via the website or by calling 0800 612 8099 so that we can help you build a solid and secure financial plan for your future.