Building financial resilience for the self-employed
Self-employed workers are more susceptible to an income shock than employed individuals. Yet this needn't be the case. COVER has teamed up with health and protection provider The Exeter to inform advisers and their clients about the choices and benefits on offer to the self-employed community.
ENTER
The missing piece of the puzzle
The self-employed population is under-protected, despite the fact it is growing rapidly. Why is income protection the missing piece of the financial puzzle they are most likely to need?
However, as The Exeter survey shows, less than one in 10 self-employed workers protect their income. This is despite the fact that income protection is the type of insurance they are most likely to need. “We believe advisers can help change this. Our research is aimed at informing advisers about the benefits of income protection and helping them to discuss this important product with any client who could benefit,” says Steve Bryan, Director of Distribution and Marketing for The Exeter. The professional diversity and economic breadth of this rapidly growing workforce has created a massive opportunity for financial advisers to start protection conversations with clients today – whatever their age or occupation.
According to IPSE, the self-employed population contributed £275bn to the UK economy in 2018
£275bn
52%
Only 1 in 10
of self-employed workers surveyed have income protection
According to research by The Exeter, most people, in every age group studied, were found to be self-employed freelancers, while more than half (52%) of 18-24 year olds rely on the gig economy as their main source of income
According to the Office for National Statistics (ONS), there are five million self-employed people in the UK. This isn’t just young urban millennials looking to earn a little extra cash each month. It includes older individuals, many with families to support, whose later years in employment may be vital to their pension pots. According to The Exeter’s ‘Ill Prepared 2020’ research report, anyone that works for themselves is more susceptible to an income shock than an employee. This could be because of a new contract failing to materialise, illness or injury preventing them from working, or an unexpected event impacting the economy on a national or global scale. We are not just talking about Uber drivers or Just Eat delivery people working part-time. The majority of those surveyed by The Exeter are self-employed on a full-time basis: they are management consultants, financial experts, freelance photographers, shopkeepers and farmers.
To get your copy of The Exeter’s Self-Employed Financial Resilience Report ‘Ill Prepared 2020’ please email marketing@the-exeter.com
Tap here to download a copy of The Exeter’s Self-Employed Financial Resilience Report ‘Ill Prepared 2020’
“When it comes to protection for the self-employed,
Sometimes in life, we all need a helping hand. This is particularly true when it comes to financial planning. Financial decisions are made every day, whether it’s budgeting for the weekly shop, paying bills, buying a home or planning for retirement. However, many still don’t realise the importance of protecting the one thing that underpins all these financial decisions – their income. A sudden loss in income due to illness or injury could happen to anyone and is likely to have a devastating impact on a person’s financial situation.
“When it comes to protection for the self-employed, advice is everything”
Arguably the need for income protection (IP) insurance has never been greater – particularly for the near five million people who are self-employed . Self-employment can offer several benefits however it also comes with risks. Having to take time off work due to illness or injury can result in a complete loss of salary, with no support (such as the Government’s statutory sick pay scheme) to fall back on. The self-employed labour force represents a growing protection opportunity for advisers.
The value of good advice
IP provides a valuable financial safety net for everyone, but despite the need our research revealed that uptake remains a challenge. Its inclusion as part of a holistic financial planning recommendation allows advisers to give even greater value and peace of mind to clients and their families.
Common barriers to selling IP include clients not understanding the need for cover, a perception that it’s costly or that it’s too complicated to sell . Advisers can raise awareness of the need for IP by asking clients how much they have saved for a rainy day, or how they would support themselves if their income suddenly stopped. Many of us would like to believe that ill health or misfortune is something that only happens to other people, or the elderly. The truth is that financial hardship can affect anyone at any time – regardless of age, income or employment status. In fact, the average claimant on The Exeter’s Income Protection Plus policies is in their early thirties - an age where people may be thinking about saving for a house or starting a family. Many IP policies also offer increased flexibility allowing advisers to tailor cover to suit a client’s individual needs and budget, meaning the argument for cover being too expensive can quickly be overcome. If IP is deemed too ‘complicated’ to sell, then advisers should make use of the valuable support and tools offered by insurance providers to help support them in their client conversations. Only by speaking to clients of all ages and job roles, including the self-employed, can we improve consumer education around the need for IP.
Making the case for protection
Together providers and advisers can demonstrate that IP is a necessity, not just a ‘nice to have’.
Advisers can raise awareness of the need for IP by asking clients how much they have saved for a rainy day
Five million
Number of self-employed people in the UK, according to the ONS
The average claimant age on The Exeter’s Income Protection Plus policies, an age where people may be thinking about starting a family
34
1. Office for National Statistics 2. The Exeter – iPipeline income protection survey, November 2019
2
1
Sources
At The Exeter, we believe that IP should be the starting point for every client conversation.
Steve Bryan, Director of Distribution and Marketing, The Exeter
In fact, the average claimant on The Exeter’s Income Protection Plus policies is in their early thirties - an age where people may be thinking about saving for a house or starting a family. Many IP policies also offer increased flexibility allowing advisers to tailor cover to suit a client’s individual needs and budget, meaning the argument for cover being too expensive can quickly be overcome. If IP is deemed too ‘complicated’ to sell, then advisers should make use of the valuable support and tools offered by insurance providers to help support them in their client conversations. Only by speaking to clients of all ages and job roles, including the self-employed, can we improve consumer education around the need for IP.
Hello! Who are you and what do you do?
From freelance writers to Deliveroo riders, meet the diverse world of self-employed and gig economy workers
Made up of marketers, consultants, cleaners, construction workers, photographers and more, self-employed occupations come in all shapes and sizes and the list is almost endless. “Never has protection insurance been so accessible to so many,” says The Exeter’s Steve Bryan. “There are literally hundreds of thousands of people each year, from all walks of life, and occupations, who purchase some form of protection product.” According to The Exeter’s Self-Employed Financial Resilience Report, ‘Ill Prepared 2020’, the gender split of the self-employed is relatively even (54% male, 46% female) and most of them are freelancers.
Roughly 60% of 18-34 year olds and 35-54 year olds are self-employed on a full-time basis. Many will themselves have children as well as a mortgage to look after. The Exeter said in its report: “While older individuals may only have a small mortgage outstanding, the need to protect their savings ahead of them approaching retirement is equally important. Should they become unable to work, they might have to lean on these savings sooner than they had originally planned.” Interestingly, more than 33% of 18-24 year olds are self-employed and living with a spouse or partner, suggesting they are likely to be responsible for paying rent. Meanwhile, those working in the gig economy, such as delivery drivers and manual workers - many of them on zero hour contracts - are especially at risk if anything was to interrupt their ability to work.
Because of the natures of these jobs, there is unlikely to be paid leave or employee benefits on offer. They tend to be physical roles, so there’s a good chance that injury or sickness would result in their earnings stopping immediately. According to The Exeter’s research, younger self-employed workers are more likely to work in the gig economy. By this, we mean short-term and temporary commitments often via on-demand service providers.
More than half of the self-employed people under the age of 24 surveyed rely on this type of work as their main source of income, while a further 10% use it to supplement their income. However, it’s safe to assume that as they get older and take on more financial responsibilities – such as mortgages and childcare – they will opt for more stable forms of self-employment than those found in the gig economy. More than a quarter (28%) of 25-34 year olds and a fifth (21%) of 35-44 year olds plan to stop being self-employed in the next three years because the work is too unreliable.
Despite the lack of certainty of earnings, the world of self-employment and the gig economy offers flexibility and technology allows people to work anywhere and at any time. However, it also poses several major challenges compared to PAYE peers. As well as no sick pay provision or company benefits, employer pension contributions and redundancy payments are also non-existent. While the self-employed population is diverse and wide-ranging, many of them share the same concerns. According to The Exeter’s research, nearly 60% are concerned about keeping up with the rising costs of living, while a third are worried about the loss of employment altogether and a quarter (23%) fear a reduction in hours.
“One of our most compelling case studies was from Adam, a small business owner who suffered a terrible road traffic accident that left him unable to work for almost two years. This was proof that you just don’t know what’s around the corner,” explains The Exeter's Steve Bryan. “By planning for the unexpected with an income protection plan, Adam was able to focus solely on his recovery without the burden of worrying about his financial stability during this period.”
Fuelled by the growing online marketplace, the gig economy is predicted to be worth around £43bn globally in 2020 (according to PwC) and there are an estimated 10 million gig economy workers in the UK. According to a survey carried out by the Income Protection Task Force in January of this year, half of Brits (49%) working temporarily or doing contract paid work for a mobile app or website said they have taken ‘desperate measures’ to survive financially. This included measures such as using food banks, shoplifting, gambling, drinking or taking a payday loan - less than 10% of those not working in the gig economy admitted to living like this.
“In general terms a typical gig economy client tends to be under the age of 35 and work short-term, temporary or multiple jobs at the same time. The roles they undertake can vary, from part-time seasonal workers to highly skilled contractors and consultants,” says Steve Bryan at The Exeter. “The one thing they have in common is financial vulnerability. Without the safety net of a regular income or sick pay from an employer, those working in the gig economy arguably have the greatest need for protection.”
Research carried out by Mintel after the outbreak of COVID-19 found that income protection interest increased by:
The predicted worth of the gig economy in 2020
£43bn
Estimated number of gig economy workers in the UK
10m
43%
32%
29%
18%
For those who said they would struggle within six months or less if they were forced to take time off work
For workers on temporary, flexible or zero-hours contracts
For those who are self-employed
More than half (53%) fear their retirement income will be insufficient
53%
More than a third worry their earnings could be hit through illness
34%
The percentage of self-employed individuals that would rely on savings if they suffered a loss of income
Almost half of all self-employed workers are saving less than £50 a month
Spotlight on the 'gig' economy
More than half of self-employed individuals work full-time
Over a third work between eight and 29 hours per week
Less than one in ten work less than eight hours a week
What is a gig economy worker?
Four gig economy workers tell us about their jobs*
54%
37%
9%
% who describe themselves as gig economy workers by age
18-24
25-34
35-44
45-54
55+
21%
20%
16%
15%
**According to Uber data
Occupation
Freelance journalist
Location
London
Perks
Working from anywhere and choosing what to write about
Salary
£27,000 p/a
Hello, I'm...
Jane
“I do not have maternity leave, sick pay or any other benefits”
Construction SME owner
Paul
“I have policies in place to protect my income and shareholders of the business”
Taking ownership and benefiting directly from project revenue
£100,000 p/a
Skilled labourer
Darren
Essex
“My contracts are irregular and if I am injured I cannot work”
Working outdoors and creating with my hands
£20,000-£24,000 p/a
Uber driver
Sunil
Birmingham
“I do not get paid if I take time off”
Flexible working hours
Up to £27,000 p/a**
1&2. pwc.blogs.com. As at June 2020 3. covermagazine.co.uk
3
*Names have been changed
TAP ON AN IMAGE FOR DETAILS
Starting conversations with self-employed clients and sourcing protection solutions is easy if you know how. We asked the adviser community how best to approach the topic of IP with clients
Tips and tricks for advisers on IP
Did you know that one million people in the UK are unable to work due to a serious illness each year? Or that a 40-year old man is four times more likely to be off work for three months than die in the next year . Tell that to a client without sick pay provision or employer support in place, and they might just reconsider protecting their income. “I think what is really important is prioritising the biggest risks for an individual,” says The Exeter’s Steve Bryan. “This is where advisers play a key role as they can talk to a client about their circumstances and establish any protection gaps and discuss the solutions available. “Income protection is flexible to the needs of self-employed workers,” he adds. “There are options to protect against regularly changing incomes or breaks in contracts, while features such as short-term claim periods can help keep cover affordable.”
Armed with hard-to-ignore facts and figures, there are several ways advisers can trigger conversations with self-employed clients about the need for income protection. Our four industry experts share their thoughts.
Drewberry's Head of Insurance Robert Harvey notes: “Whilst advisers shouldn’t distress their clients, I find the most effective way to overcome barriers is to simply get your client to consider the consequences of not having protection, both for their self and those they love. I have on occasion simply asked a client to imagine themselves in a situation where their income has ceased due to ill health and for them to tell me how they expect to manage.” “If a customer happens to offer some suggestions short of arranging income protection, it’s generally not difficult to highlight the flaws in their thinking” says Harvey.
Starting conversations and overcoming barriers
The above are just some of the responses advisers hear from clients over the years. “One doesn’t need to be an experienced protection adviser to demonstrate the shortcomings in those statements” says Harvey. Charly Higman from TFA always starts conversations with why protection planning is important. “Perhaps use recent claims experience or scenarios that highlight what can happen when you’re not protected” she says. “Explain that conversations will take place over a number of sessions with plenty of fact finding and questioning to ensure we can tailor a solution which is exactly right for the clients and within the budget they have available. Clients should feel that this is an advice process not a sales process.” It is also important that clients understand that the advice is independent, she adds. “It means they can select suitable plans from the whole financial marketplace if there is a feature or a benefit attached to a plan, or it’s just the best value for money we can source.”
The big three objections
people in the UK are unable to work due to a serious illness each year
One million
“I’ll just sell up and downsize”
“State benefits will be enough”
“My spouse will go out to work instead”
“I’ve never had any time off work anyway”
Select an object to view the objection
“I always talk through what my clients earn, their outgoings and commitments, if they have a family” says Greatorex. “I believe deep down every self-employed person has thought about what would happen if they were sick, and been worried by this. By asking the right initial questions, I feel I can highlight that they do need the cover; that financially they/their family are at risk if they are ill, and really the issue is more likely to be that they think they can’t afford it.”
I don’t think I need it/I think I will review that later.
“Sometimes I believe clients have a misconception of the costs of income protection, and I always like to point out tht there are a lot of options available to be tailored to their budget” says Greatorex. “Options include reducing the amount of cover or staggering the payments a client would receive at claim - for example, some of the income is paid by the insurer after one month of sickness.” Charly Higman adds: “I explain to some business clients that the company paying the premiums could (dependent on professional accountancy advice) be an option and therefore the cost of the plan would not be deducted from their already taxed income.”
I can’t afford it.
“This can often be the biggest barrier, as this highlights clients don’t tend to want to consider the possibility of sickness” Greatorex tells us. “I would in this instance highlight the support income protection offers, with some claims examples. It’s also useful to highlight the cost of delay if people are younger. When I speak to clients in their 20s/30s I always highlight they are lucky to be looking at protection early, because of the impact that waiting and delaying cover has on the cost of the premiums they will pay.”
I’m fit and healthy.
Tips and tricks to help you along the way
“Anyone self-employed should consider the need to protect their income first”
Naomi Greatorex, Managing Director of Heath Protection Solutions
“Short-term policies for those on a tighter budget are available for the self-employed”
Robert Harvey, Head of Insurance at Drewberry
“When discussing protection with self-employed people it’s really important to understand their business/job and how they work”
Charly Higman, Mortgage and Protection Director for TFA
REVEAL
“There are a number of products available with features that are particularly useful to the self-employed or those with fluctuating incomes. These include short-term policies for those on a tighter budget, as well as some plans that do not require the policyholder to provide evidence of earnings in the event of a claim” according to Robert Harvey, Head of Insurance at Drewberry. Naomi Greatorex agrees, adding: “Income protection comes in various forms with long term and budget options, specialised options for higher risk occupations, and some offering minimum benefits guarantees for people with fluctuating incomes.”
Questions to ask include if the client is a sole trader or if the client has a limited company? How do they structure their pay? Do they keep an emergency fund or are their income, financial commitments and living expenses more month by month? According to Charly Higman, irregular income or income that cannot be verified are things to consider if you are advising a self-employed individual. “For instance, a newly self-employed person obtaining cover if they have a high-risk occupation like scaffolding - needing to afford ‘day one’ cover rather than lengthy deferred periods - there is potential to use their business to pay for protection premiums.” Greatorex explains: “I advise all sorts of clients, from make-up artists, hairdressers and designers to IT contractors and barristers. All clients have commitments, and people generally speaking live to their means so the advice I give is always the same: protect your ability to earn income! The risk of being unable to work due to sickness or an accident before we retire is high, and as a self-employed person you don’t have the safety net that employed people may have.”
CLOSE
“For those of us with families, we would all like to ensure that our loved ones are financially secure should the worst happen” explains The Exeter’s Steve Bryan. “So life insurance, either on its own or including some critical illness cover, is an important consideration. In such situations, Bryan adds an adviser will look at an individual’s situation and provide guidance on the best solution for the circumstances. According to Charly Higman, Mortgage and Protection Director for TFA, clients who are transient workers or self-employed generally lack the benefits that employers provide, such as sick pay or death in service. “They will probably experience peaks and troughs in their income and may find it difficult to budget as a result,” she says.
“We all want to ensure our loved ones are financially secure should the worst happen... income protection is essential”
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“There is a massive opportunity for advisers to assist these clients with protection, particularly income protection. Most clients without employee benefits will be aware that they are in charge of their own money-making machine, but often they aren’t aware of the level of support available should the machine break down.” For instance, if the self-employed are off work due to ill health they’re not normally eligible for statutory sick pay (SSP): “Transient workers who are lucky enough to be in employment at the time they become ill, may be entitled to SSP but they might have to make some noise before they get it.” This could leave them resorting to Universal Credit applications, which are lengthy and usually means-tested, Higman warns.
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When speaking to self-employed people there are a number of protection needs to consider, says Naomi Greatorex, Managing Director of Heath Protection Solutions. “I would talk through my client’s situation: Are they single? Do they have a partner, or a family? Mortgage commitments? “I believe that anyone that is self-employed should consider their need to protect their income first. Too few people have set aside enough money to deal with even a short period of sickness.”
1. Money Advice Service 2. Institute and Faculty of Actuaries
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“For those of us with families, we would all like to ensure that our loved ones are financially secure should the worst happen” explains The Exeter’s Steve Bryan. “So life insurance, either on its own or including some critical illness cover, is an important consideration. In such situations, Bryan adds an adviser will look at an individual’s situation and provide guidance on the best solution for the circumstances. According to Charly Higman, Mortgage and Protection Director for TFA, clients who are transient workers or self-employed generally lack the benefits that employers provide, such as sick pay or death in service.
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“They will probably experience peaks and troughs in their income and may find it difficult to budget as a result,” she says. “There is a massive opportunity for advisers to assist these clients with protection, particularly income protection. Most clients without employee benefits will be aware that they are in charge of their own money-making machine, but often they aren’t aware of the level of support available should the machine break down.”
For instance, if the self-employed are off work due to ill health they’re not normally eligible for statutory sick pay (SSP): “Transient workers who are lucky enough to be in employment at the time they become ill, may be entitled to SSP but they might have to make some noise before they get it.” This could leave them resorting to Universal Credit applications, which are lengthy and usually means-tested, Higman warns.
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Greatorex explains: “I advise all sorts of clients, from make-up artists, hairdressers and designers to IT contractors and barristers. All clients have commitments, and people generally speaking live to their means so the advice I give is always the same: protect your ability to earn income!” “The risk of being unable to work due to sickness or an accident before we retire is high, and as a self-employed person you don’t have the safety net that employed people may have.”
Questions to ask include if the client is a sole trader or if the client has a limited company? How do they structure their pay? Do they keep an emergency fund or are their income, financial commitments and living expenses more month by month? According to Charly Higman, irregular income or income that cannot be verified are things to consider if you are advising a self-employed individual. “For instance, a newly self-employed person obtaining cover if they have a high-risk occupation like scaffolding - needing to afford ‘day one’ cover rather than lengthy deferred periods - there is potential to use their business to pay for protection premiums.”
Why the self-employed cannot blindly bank on state support
Of the 260,000 income protection policyholders the New Policy Institute analysed, 46% would not be eligible for Universal Credit due to their personal circumstances
46%
Many of us believe the welfare state will be there when we truly need it. But few thoroughly comprehend what life would be like on this reduced income, or actually know whether they are eligible to receive support. This means many risk wrongly presuming the state will cushion their fall and so face being financially underprepared should they be unable to work.
A remarkable one in five self-employed people in our survey said they would seek government benefits, such as Universal Credit, if illness or injury prevented them working. Yet coronavirus has undoubtedly raised awareness of how unexpected events can wipe out our incomes. It is especially concerning given the fact the chance of an illness or injury preventing people from going to work is far higher than a global health pandemic.
Going in blind
1. Office for National Statistics 2. GQ Magazine 3. gov.uk 4&5. Money Advice Service 6. Association of British Insurers 7. COVER Magazine 8. bbc.co.uk
Around one in four respondents to The Exeter survey weren't aware of how much money they would actually receive in government benefits
Average employee earnings reached £585 per week in April 2019 , equivalent to roughly £30,420 , according to the latest data from the Office for National Statistics
£30,420
28%
This is more than the £594.04 monthly standard allowance on Universal Credit that a couple aged 25 or over could receive, and far higher than the £409.89 a single claimant aged 25 or over could get . The government temporarily increased Universal Credit benefit to these figures for 12 months from April 2020 due to the coronavirus crisis, but this extra support will no doubt be removed .
Inevitably with government funding, the qualifying criteria means assessing eligibility can be extremely complex. Some of the many stipulations relate to savings and income. If an individual, or one of a couple, has savings of more than £6,000, or receives other income, then Universal Credit payments are reduced, and applicants are entirely ineligible if someone has £16,000 saved up . A study by the New Policy Institute found that 46% of the 260,000 income protection policyholders it analysed would not be eligible for Universal Credit due to their personal circumstances. This means tens, or even hundreds, of thousands of people seriously need to ascertain what they would receive from the state if they could not work.
Mind the red tape
Everyone needs to take greater responsibility for their future financial health, which includes considering how they could afford their outgoings if they were unable to work. With income protection, policyholders can protect a larger proportion of their income than they would receive under state benefits. This provides policyholders with a greater financial cushion should they experience a drop in income due to illness or injury. Income protection does not penalise people for having responsibly built up a savings pot and payments can start on the first day of an illness, unlike Universal Credit, where the first payment routinely takes five weeks to arrive. Beyond this, income protection policies are far more flexible than Universal Credit.
Take control
Income protection payments can be made until claimants are 70, whereas receipt of Universal Credit stops at the individual’s state pension age, and claims are only assessed on the policyholder’s income, not that of the household, as with state benefits. With income protection, claims are also based solely on the policyholder’s ability to do their own occupation, meaning they can concentrate on their recovery rather than having to find alternative work to make up for a shortfall in income which may happen under Universal Credit.
Arguably one of income protection’s greatest strengths is the ancillary services it comes with. Income protection policies provide the option for payments to start a set number of weeks or months after an individual stops working, but extra support can be accessed immediately. This includes online GP consultations, second medical opinions for medical conditions, mental health support through the likes of counselling and cognitive behavioral therapy sessions, physiotherapy, and more. Such services could be vitally important given the waiting times for similar services in the NHS.
Crucial support
Thankfully, record sales of income protection policies, which are particularly pertinent for self-employed workers, suggest more people are putting plans in place but the prevalence of coverage means too many people still have blind faith in the state.
Mental health treatment can take longer than 90 days to start after an initial assessment appointment
45 days
132 days
90 days
The average wait for routine physiotherapy checks is 45 days
The length of time some individuals wait for physiotherapy treatment
Waiting times for treatments on the NHS
7
8
Income protection policies are far more flexible than Universal Credit.
6
5
4
Many presume the state will cushion their fall and so face being financially underprepared
self-employed workers would seek government benefits if they couldn’t work but few actually know what they would get, if anything
1 in 5
Case closed on protection policies
It can be especially powerful to draw upon existing case studies, such as COVER’s 2019 interview with Sky Sports anchor Simon Thomas. Many advisers draw upon experiences of their own clients who may have claimed to demonstrate the potential benefits of having a protection policy in place.
Four real-life examples*
Sarah worked in the UK and internationally and was also a smoker. “Due to my client’s age, occupation and smoking status, premiums were very high with a standard income protection contract, in this instance the best option was a guaranteed age costed contract with The Exeter” Heath Protection Solutions’ Naomi Greatorex says. The client felt she wanted the long-term income option and did not want to look at budget cover, as she was worried that if she was unable to work she may need to claim for longer than two years. However, these premiums were still more than she could afford.
Name: Sarah Age: 48 Occupation: Hairdresser
After discussion and looking at her emergency fund, Greatorex decided the best way to get her the level of income protection she wanted was to split the cover. 50% of the benefit would be paid if she was sick for one month and 50% of the benefit would be paid after three months. Greatorex explains: “This way, she kept an emergency fund which she was comfortable would give her the financial support she would need in the first two months before the additional cover paid out after three months. This helped my client get the level of cover she wanted within budget.”
Name: Phil Age: 45 Occupation: Project manager, limited company owner
Phil wanted to make sure that for any insurances he set up, premiums were paid through his company to replicate benefits that he had previously received through an employer. Heath Protection Solutions’ Greatorex looked at setting up life cover for him, as these premiums are paid through the company gross. This means as the life assurance is set up as a Relevant Life plan the premiums are paid free from income tax and corporation tax. This makes them highly tax efficient. Importantly, the client understood the risk to his income if he was injured or sick and unable to work.
He rode a bike in and out of London for work and felt this elevated his risk, and definitely meant he was aware of the financial danger of injury to his income. “I talked through personal and executive income protection, my client wanted to pay these through his company and allow for costs in the business which cannot be covered personally,” she explains. “I used a provider to set up executive income protection. The premiums were allowable as an expense, but benefits are paid into the company and taxable as income. “My client was happy that these benefits gave him the support he needed,” Naomi concludes.
Name: Craig Age: 30 Occupation: Manual worker
Craig was advised to take out income protection as he is a self-employed manual worker. His adviser recommended he insured the maximum amount of income he could under the plan, with a three month waiting period for benefit payments. The insurer was not concerned with his manual occupation and he was accepted on standard terms. Two years later he had a nasty accident which damaged his shoulder and arm. The injury required surgery and extensive physiotherapy to repair it.
The client contacted his provider within days of the accident asking if he could make a claim on his income protection plan. He went on to claim for three months before he returned to work.
Name: Stan Age: 29 Occupation: Carpet fitter
Stan arranged his mortgage with TFA and continued to have a full protection review. “We arranged combined life and critical Illness cover as well as full income protection benefit,” Charly Higman reveals. Four years later he went to the doctor feeling unwell, the doctor admitted him straight to hospital where he had open heart surgery to repair an enlarged aorta. The critical illness paid off his mortgage within days and the income protection supported his family during his long recovery.
Name: Sarah* Age: 48 Occupation: Hairdresser
Occupation: Project manager, limited company owner
From web designers to hairdressers, dog walkers to plumbers, the UK’s self-employed population is one of the jewels of its economy, contributing billions of pounds each year. Yet the shock of a global pandemic has left the nation reeling and laid bare the challenging and uncertain nature of being one of the five million self-employed workers in the UK. Many self-employed people have been left out of pocket as the COVID-19 coronavirus continues to impact economies, and the government’s Self-Employment Income Support Scheme fails to appropriately cover their needs. Unfortunately, this comes as little surprise. The Exeter has revealed in this guide that income protection is the least common type of protection amongst this group, despite the fact this workforce is much more susceptible to an income shock than PAYE employees – and that is when a global pandemic is not in play.
“Income protection is more than just building financial resilience for your clients”
Despite the increased number of flexible schemes on offer for the self-employed sector, many individuals remain reluctant to take on cover, believing it will not be needed.
This is a viewpoint that needs to change, and fast. The benefits of income protection are many and discussed by COVER and The Exeter at length in this guide, and in its exclusive report ‘Ill prepared 2020’ specifically. Income protection covers you not only against sickness, but also if an accident leaves you unable to work. In many cases, protection will provide a monthly income to match a percentage of your own earnings which can be the peace of mind that is needed in times of financial stress. As The Exeter notes, loss of income is a risk for anyone in employment and can occur at any time, regardless of age, health or income. And with COVID-19 placing undue pressure on a number of sectors through mandatory lockdowns, the economic landscape is unlikely to return to normal anytime soon. Advisers have a key role in educating their self-employed clients about the benefits of income protection as well as its flexible nature. Income protection cover today offers a wide variety of options to suit a range of different job roles, covering those that regularly experience breaks in employment or perhaps have to deal with changing income levels, for example. In essence, advisers have a huge opportunity today to promote the merits of income replacement insurance that is able to support their clients at every point of self-employment. And by doing so, advisers will be building more than just their clients’ financial resilience. The additional health and wellbeing benefits available through many IP policies gives greater peace of mind by adding value over and above the financial cover in place. Never has this been so beneficial as today. We hope this guide served as a useful explanation of just how important it is to ensure a conversation about income protection is on the adviser/client agenda, and how you can make that happen. Adam Saville Editor, COVER
We would love to hear your feedback. Contact adam.saville@incisivemedia.com
This is a viewpoint that needs to change, and fast. The benefits of income protection are many and discussed by COVER and The Exeter at length in this guide, and in its exclusive report ‘Ill prepared 2020’ specifically. Income protection covers you not only against sickness, but also if an accident leaves you unable to work. In many cases, protection will provide a monthly income to match a percentage of your own earnings which can be the peace of mind that is needed in times of financial stress. As The Exeter notes, loss of income is a risk for anyone in employment and can occur at any time, regardless of age, health or income. And with COVID-19 placing undue pressure on a number of sectors through mandatory lockdowns, the economic landscape is unlikely to return to normal anytime soon. Advisers have and can play a key role in educating their self-employed clients about the benefits of income protection as well as its flexible nature. Income protection cover today offers a wide variety of options to suit a range of different job roles, covering those that regularly experience breaks in employments or perhaps have to deal with changing income levels, for example. In essence, advisers have a huge opportunity today to promote the merits of income replacement insurance that is able to support their clients at every point of self-employment. And by doing so, advisers will be building more than just their clients’ financial resilience. The additional health and wellbeing benefits available through many IP policies gives greater peace of mind by adding value over and above the financial cover in place. Never has this been so beneficial as today. We hope this guide served as a useful explanation of just how important it is to ensure a conversation about income protection is on the adviser/client agenda, and how you can make that happen. Adam Saville Editor, COVER
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