More than 4.3 million self-employed workers in the UK do not have plans in place to cover loss of earnings if they were suddenly unable to work, despite their families disproportionately relying on their income to survive.
That’s the key finding to come out of new research by Scottish Widows.
Worryingly, just 7% of self-employed individuals in the UK have critical illness cover in place to safeguard themselves and their families if they were unable to work. For comparison, 9% of the general population has critical illness cover.
The number of people self-employed in the UK now stands at 4.79 million, which represents over 15% of the total workforce. That means that there are some 4.3 million workers who have no protection in place.
This is particularly concerning given the fact that two thirds (62%) of self-employed workers’ households rely solely on one worker’s income. This compares to 52% of the average population.
However, it seems that self-employed individuals aren’t under any illusions when it comes to the importance of them being able to work, with one in five (21%) saying they would not be financially secure at all if they were unable to. A further 12% said they don’t know how long they would be able to pay their household bills for if they or their partner were suddenly unable to work. Just under a third (30%) agreed that they wouldn’t be able to rely on a single income.
Self-Employed Workers Have More Savings
In terms of savings, self-employed workers are doing better than the general population. While self-employed workers have average savings of £31,442, the general population have an average of £25,767, which is £5,675 less.
Despite these extra savings, though, self-employed people do not know how long their savings would last if they were unable to work. Almost one in 10, though, indicated that it would be less than one month.
Self-employed workers also have higher outgoings, with average monthly mortgage payments of £618, compared with £561 for the general population.
The same goes for rent, with self-employed people paying £601 on average per month, compared with £475 for the general population.
Self-employed workers are also more likely to have non-mortgage debts carried over each month: 36% compared with 33% for the general population.
A third (34%) of self-employed people do have life insurance, however, which is slightly higher than the general population (32%). But even though this is the case, arranging financial protection for their family in case they die does not seem to be a priority.
Johnny Timpson, protection specialist at Scottish Widows, said the research has uncovered a “worryingly uncertain picture” for a large proportion of the UK workforce.
“With so many families reliant on the income of self-employed people, it is absolutely vital that they have a back-up plan in place should the worst happen.
“No one wants to think about disaster striking, but knowing that your family will not be left struggling will give you peace of mind and allow you to enjoy the many benefits that being self-employed brings,” he said.
People will buy insurance to protect their car, their house and their phones amongst other things. However, one of the most important things to protect is your income – especially if you are self-employed. If you have no income, many people will not be able to afford their other household bills. Protection is not as expensive as people think but is very important for the self-employed.
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