Self-employed people are leaving themselves financially exposed and face needing to carry on working should they be injured or become ill, despite the majority of people recognising the security of having protection in place.
Just 6% of self-employed people have taken out income protection (IP) while 17% of those who are self-employed would have to carry on working through illness or injury, according to research from LV=.
The report also found just 16% of employed workers were covered by an IP product despite the majority (56%) of working adults feeling more financially resilient if they had insurance that paid an income if they were unable to work due to illness or injury.
LV=’s Reaching Resilience report surveyed 4,000 UK adults and revealed one in five employed and self-employed workers would rely on their partner’s income or savings if they were unable to work.
One in five (19%) workers would struggle to pay their mortgage or rent if unable to work for two months due to illness or injury and one in ten (11%) would resort to taking on debt such as a loan, using their overdraft or credit cards.
More than a third (35%) of UK workers who hold debt other than a mortgage owe up to £5,000 and 26% of working adults have less than £1,000 in savings or no savings at all.
Six in 10 of 25-44 year olds without protection say they would feel more financially resilient if they had a policy that paid them if they were unable to work due to illness or injury.
When compared with people without a protection policy in place, policyholders were more likely to see no impact on their financial situation if they were to experience a major health problem.
For those aged 25-44, 20% of policyholders would be able to pay their mortgage compared to 15% of people without protection cover, the same percentage would be able to meet their future financial goals compared to 12% of people without protection, and 16% of policyholders would be able to maintain their financial security compared to 10% without protection.
Mike Farrell, protection sales and marketing director at LV=, said: “It is good to see that many consumers understand the need for financial resilience and protecting their income if accident and illness stops them working.
“However, too many self-employed people do not have any insurance in place to protect their income leaving them financially vulnerable if they are unable to work.
“The data reveals that many UK adults believe that they can rely on their savings, without taking into account how quickly this could truly last them or take to build these back up. Many would last only a couple of months before they were unable to pay their mortgage or rent.
“Protection and financial resilience is an important aspect of planning and it’s a good idea for people to consult a financial adviser to find the right policies that protect their income.”