The UK workforce now comprises around 4.8 million self-employed workers – about 15% of all those in work. In the capital, the percentage is higher (17.4%), but self-employment is also more prominent in Yorkshire and Humber and the South East, according to the February 2018 ‘Trends in Self-Employment’ report by the Office of National Statistics’.
Self-employed workers are more likely to be found in sectors such as construction and professional, scientific and technical services, but are also prominent in motor retail and repair, administrative and support services and human health and social work.
Yet, despite running their own ship and being dependent on their own efforts to earn a living, figures show that 90% of self-employed people in the UK have no Critical Illness insurance in place. As worryingly, three-quarters of businesses run by self-employed owners have no employees, so might not be able to trade, if the owner fell seriously ill.
Whilst an extended sick leave would cost the average self-employed person about £67,550 a year in lost income, half of the self-employed have no savings to call upon and only one-third contribute to a pension scheme. This is why, during 2017, the Taylor Review called for a self-employed version of the auto-enrolment-based Workplace Pensions.
Statistics also show that 28% of UK businesses founded over the last two years have no business protection in place even though, if the owner died, it would probably be the end for 46% of them.
Awareness of cover such as Key Man insurance is not that high. This is despite this cover recognising that certain individuals are crucial to a business’s success and providing payouts if a serious illness or accident suffered by the person leads to them being unable to work. It is cover that focuses on people who contribute key skills, knowledge and leadership to a business, whether or not they are the CEO or managing director.
Critical Illness Policies paid out in 92% of cases in 2016, with the average payment being two times the UK’s average salary (£68,000). Paid in a tax-free lump sum, this cover can provide the income required by a freelancer, or self-employed person, to keep things ticking until their return to work.
But it is not just people-based protection that the self-employed ignore. Many also fail to insure equipment vital for their work, such as laptops, tools or specialist equipment. Whilst the average business owner spends nearly £10,000 on launching their self-employed enterprise, and then more than six months getting it launched, surprisingly, the same expenditure is not put behind protecting it.
If you are self-employed and need to safeguard your business, protecting the income it generates for you, please get in touch.