The rise of self-employment in the UK

Self-employment in the UK is at it’s highest level since records began.

According to government statistics, 4.8 million of us now choose to work for ourselves, rising from 3.3 million in 2001[1].

The self-employed market now makes up approximately 15% of the UK workforce.

Self-employment is more prevalent amongst men (3.2 million) compared to women (1.6 million), however, there has been a significant rise in both genders.

The most popular age bracket for those who are self-employed is 45-54 years.

This is an age range when many of us still have a mortgage to pay and/or dependants who rely on us financially.

Highlighting the importance of life insurance for self-employed workers.

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Why do people become self-employed?

The recent rise in self-employment is in part thought to have been triggered by the global financial crash of 2008.

However, there are many other contributing factors:

Despite all of these potential benefits from going self-employed, there can also be some significant drawbacks.

Most notably around the protection of your loved ones if anything were to happen to you…

A greater need for cover protection

People who are employed by a business generally enjoy the reassurance of greater protection.

For example, many roles include a death in service (or group life insurance) benefit. Ensuring, if anything were to happen to you, your loved ones would receive 2, 3 or 4 times your annual salary.

You could also enjoy:

However, when you’re self-employed all of this responsibility falls to you.

What with providing for your family, whilst working for yourself, the financial risks can be scary.

If you don’t have cover and fall ill or perhaps suffer an accident, your income could be severely impacted and your dependents suffer financially.

What’s more, if you’ve started your own business you may have had to invest your own savings to get the business started.

This could mean that a lot of your wealth is tied up in your business, which could leave your family more vulnerable if anything were to happen to you.

In a worst case scenario, if you were no longer around to provide, how would this affect your family?

Why do self-employed workers require life insurance?

Those who are self-employed require cover protection for the same reasons those are employed do.

However, because of the extra layer of protection an employee receives the need is often even more pronounced.

Ask yourself, if you were no longer around could your partner:

Self-employed workers put immeasurable amounts of time and money into getting their businesses off the ground, but our research reveals that they’re failing to protect their greatest asset; themselves.’ – Johnny Timpson, (Scottish Widows).

Despite this, an article published on suggests 70% of our self-employed workforce don’t have any form of life insurance.

Thankfully there are a number of cost-effective policy options available which can provide a reassuring safety blanket for you and your loved ones.

Cover protection can cost as little as 20p-a-day and provide peace of mind that your family finances are secure whatever the future may hold.

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What type of self-employed jobs require life insurance?

Regardless of the self-employment sector that you work in, life insurance is generally a very good idea.

Common self-employed occupations in the UK include:

With the growing influence of the internet in recent years, there has never been a better time to go it alone and become self-employed.

However, doing so can bring with it certain vulnerabilities…

Some self-employment roles are more dangerous than others. For example, many construction tradesmen are self-employed and these roles can involve higher personal risk.

In fact, there are more people self-employed within the construction sector (934,000) than any other[4].

For applicants considered high risk by insurers, Reassured also have an impaired risk team.

This team of specialists work on your behalf, free of charge, to find cover if you’ve previously been declined or found it hard to secure affordable cover.

Life insurance policies for self-employed

Life insurance

Life insurance can be a very cost-effective option, with cover protection available from just 20p-a-day.

Traditional term-based life insurance pays out a lump sum if you pass away during the policy term.

Level term life insurance pays out a fixed sum if you pass away at any time during the term.

These proceeds can be used for whatever your beneficiaries choose; paying off a mortgage, meeting future living costs, funding a funeral.

Decreasing term life insurance tends to be the most cost-effective policy option.

However, here the pay out amount reduces over the course of the policy term.

So, if you passed away 1 year into a 20-year term your loved ones would receive more than if you passed away 15 years into the policy.

Typically decreasing term cover is used just to cover a repayment mortgage debt.

Critical illness cover

Critical illness cover provides a pay out if you were to fall seriously ill with a condition covered by your policy.

It can be taken out either as a standalone policy or as part of your life insurance.

So, if you were to fall ill and were unable to work, you could receive an early pay out and your family wouldn’t have to wait until after you’ve passed away.

If your critical illness cover was part of your life insurance, the policy would then expire.

Either way, this extra layer of protection comes at an additional cost to you in your monthly premiums.

Despite the obvious benefits, research from Scottish Widows found that 93% of the UK’s self-employed workforce don’t have critical illness cover[5].

Family income benefit

Family income benefit, or FIB, is a less well-known policy option, which works well for many families.

Instead of paying out a single lump sum, family income benefit instead provides monthly tax-free payments for the duration of the policy.

Premiums tend to be very low, as the level of risk posed to the insurer reduces with each passing month.

Regular payments can also make long-term family budgeting less complicated; removing the need to invest/manage a large sum of money, (which can incur fees and taxes).

Income protection

Income protection, although sounding very similar to family income benefit, is in fact quite different.

Whereas family income benefit pays out regular payments if the policyholder dies within the term, income protection covers your income whilst you’re alive, but unable to work due to an illness or accident.

Please note, we don’t currently sell income protection policies at Reassured, although we do sell family income benefit cover.

Over 50 life insurance

Self-employment amongst those over 65s has risen by a staggering 310,000 since 2001.

As a result over 50 plans can be a good option, especially if you’ve experienced health problems in the past.

This is because you’re guaranteed acceptance without the need to answer any medical questions, if a UK resident and aged 50 – 85.

These policies only tend to go up to a sum assured of £25,000. They’re usually taken out to cover rising funeral costs or provide an inheritance.

Whole of life insurance is another good option for those within this age range. It can allow you a much greater sum assured, although health questions are asked during the application.

Self-employed hairdresserSelf-employed female hairdresser

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How much is life insurance for self-employed?

The cost of your life insurance is not calculated any differently just because you’re self-employed.

That said, it’s possible that the job you undertake can impact the cost of your monthly premiums.

An insurer will always look at certain key criteria, such as your:

Dangerous jobs=higher premiums

How much life insurance do you need?

Only you can answer how much life insurance you require, as no two scenarios are ever the same.

In the first instance, consider:

  1. What it is you want to protect?
    – Self-employed salary
    – Mortgage debt
    – Family living costs
    – An inheritance
    – Funeral costs
    – Outstanding debts.
  2. Your personal circumstances?
    – Mortgage balance
    – Number of children
    – Age of children
    – Partner’s employment status
    – Savings/assets.
  3. How long do you need cover?
    – Until your mortgage is paid off
    – Until your children are financially independent
    – Until you retire.

Once you’ve answered the above you should have a good idea on the level of cover you require.

Writing your life insurance in trust

Writing your life insurance in trust is a legal agreement whereby you sign the rights of your policy over to a trustee after your passing.

The 3 key benefits of putting your policy in trust include:

  1. Avoiding or minimising 40% inheritance tax
  2. Avoiding the probate process, for a faster pay out
  3. Greater control over your policy, (who gets the proceeds, how and when).

After you’re gone, by default, the value of your life insurance policy forms part of your legal estate.

Did you know that anything over the £325,000 inheritance tax threshold is chargeable at 40%?

However, by writing your life insurance in a trust you can detach your policy from your estate, meaning your loved ones receive 100% of the pay out.

Another benefit is that you don’t have to wait for probate to be granted, allowing your loved one’s faster access to the funds.

Finally, by appointing a trustee, you’re able to detail exactly how you would like the proceeds to be distributed.

Reassured’s free trust writing service

Writing your life insurance policy in trust doesn’t have to be challenging.

At Reassured, we’re proud to offer all our self-employed customers a free trust writing service.

A member of our dedicated team can take you through the application process, answering any questions you have and providing peace of mind.

Self-employed workers free trust serviceSelf-employed free policy in trust service

Joint life insurance if you’re self-employed

If you’re self-employed and in a relationship, you may consider taking out joint life insurance cover.

The main benefit of a joint policy is you only pay one monthly premium. As a result, it’s around 25%-30% cheaper compared with two single policies.

However, the key disadvantage is that only one payout will ever materialise, usually upon the first death.

After this pay out is issued, the policy then expires, leaving the surviving partner uninsured.

Please note, both parties don’t have to be self-employed for you to secure a joint policy.

In contrast, if you take out two separate policies this could offer two pay outs and double the coverage.

Even if your partner is not in employment it can be important to cover them, especially if you have children.

Take a minute to think about all the roles a stay-at-home parent fulfils. Then think of how you would replace these roles and the costs involved.

Terminal illness cover if you’re self-employed

All of the life insurance policies we sell at Reassured come with terminal illness cover as standard, at no additional cost.

What this means is, if you’re self-employed and you fall terminally ill (have less than 12 months to live) your life insurance can pay out early.

Receiving a pay out before you pass away could enable you to enjoy your final days with your loved ones.

It could also provide you with peace of mind that all your finances can be taken of care of.

Ultimately, you can use these proceeds as you wish; you may want to clear the mortgage, provide an inheritance, pay for a live-in carer or adapt your home.

Other types of insurance for self-employed workers

Although we specialise in life insurance, if you’re self-employed you may benefit from other policy types:

What cover you need will obviously depend on the sector you work in.

Money Advice Service, get up by the government to provide impartial financial advice, have written an excellent article on this.

Compare multiple quotes, (and save money)

Did you know that the cost of life insurance can differ significantly between insurers?

This is due to each insurer employing different underwriting processes.

As a result, whichever policy option you choose, it’s essential to compare quotes to ensure you receive the most cost-effective cover.

At Reassured we can do all of the hard work for you, comparing the top insurers and securing the right cover, at the best price.

And our award-winning brokerage service is completely free of charge to use.

If you’re self-employed, you work day in day out building your business and providing for your family.

But ask yourself, are you protected and have you secured the financial future of your loved ones?

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[3] SunLife (2020), Cost of Dying Report,