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Back..  The Importance of Life Insurance for the Self-Employed

 

Taking the leap towards self-employment is a life-changing move that has many implications for your personal finances. When someone becomes self-employed they no longer receive the benefits they may have had when working for an employer. As an employee you are automatically entitled to sick pay, maternity leave and death in service benefits that come with employment, plus you will no longer have access to a workplace pension scheme.

As a self-employed person you will be fully responsible for your own benefits and therefore will have a particular need for life insurance. Things that need to be given some serious consideration include how you would cope with sickness or an accident that leaves you unable to work. Ironically however, given the nature of self-employment, this is also the time when you are most likely to be short of cash. When considering your life insurance in this case there are a number of things you need to take into account: namely, what existing arrangements are in place; what are you actually able to afford; and what dependents and liabilities are you responsible for.

Any life insurance or critical illness policy taken out at this time should cover your mortgage, provide a lump sum for any dependents and crucially, also cover any loans or other debt incurred in order to start your business. As a self-employed person you forgo the safety net usually provided by employers and so the financial security of you and your family will absolutely depend on your good health and being capable of doing your job. Should the worst happen or should you be struck down with an illness or disability that leaves you unable to work, a comprehensive life and critical illness policy can act as a safeguard for your family’s financial security.

Despite the importance of life and critical illness cover, we are in fact massively underinsured as a nation. Indeed, the ABI has estimated that one in three Britons have no life insurance at all and that of those who do a further one in three have not reviewed their policies for five years and so run the risk of not having sufficient cover to meet their needs.

Life insurance therefore, is more relevant than ever but is particularly so for the self-employed. For anyone embarking on this career path a review of your current life insurance cover is an absolute must and may well provide you with the financial security and peace of mind that is so vital at this life-changing stage of life.