Thousands of small business owners have no income protection insurance and would see their income drop off a cliff if they fell ill.
The problem is particularly stark among the self-employed sector with only around 9% of sole traders taking out insurance against falling ill and being unable to work.
“The figures are concerning and are particularly relevant in the current Covid-19 pandemic,” said wealth management professional Emily Small, a Director at Richard Jacobs Pension and Trustee Services. ”In common with other companies in the sector, we always inform small business owners about income protection, but the take up is low.
“It is vital that the finance sector raises the profile of this little known sector, especially now. Many small business owners will have seen their incomes fall due to the economic consequences of the pandemic and illness would make matters worse. We are now hearing medical professionals detailing how some people don’t recover easily from Covid-19. People of working age, who may not have needed hospital treatment. are now reporting longer-term effects such as lung scarring, excessive tiredness and heart problems and some are not returning fully to work for several months.
“Income protection insurance means people will continue to get paid a salary for an agreed period of time, depending on the conditions of the policy taken out. Self-employment is on the rise, with more than 5 million UK workers in 2019 compared to 3,2 million in 2000, yet many set up a business with little regard to the fact they won’t enjoy sick pay as they did in their previous job.”
Emily highlighted the fact that the 9% take up by those who could buy income protection insurance contrasts starkly with the 70% who routinely purchase home contents insurance. She added: “Of course, every policy has terms and conditions and it is important to check whether there are exemptions for certain illnesses and medical conditions within a policy.”
According to the Department of Health and Social Care’s 2019 workplace report, more than 100,000 Britons leave work following a spell of long-term sickness absence each year. In any economic environment, that is a high figure, but in a pandemic, with the recognised additional stresses of job loss, anxiety, mental ill health and risk to health, this should serve as an alarm bell to advisers to make sure their clients have appropriate protection in place.
To find out more about Richard Jacobs Pensions & Trustees Services Ltd please go online to www.jacobs-pensions.co.uk.
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