Nick Kirwan, head of health and protection insurance for the ABI, says that becoming self-employed is: ‘a time when they might well be giving up some life insurance that their employer has been providing in the past. All of a sudden they become responsible for all of their own benefits – they don’t get sick pay any more.’ Mr. Kirwan also emphasizes that, without life insurance, being self-employed requires you to remain permanently super-fit: ‘If you’re self employed, absolutely everything does depend on you being healthy and being able to do your job.’

The ABI’s comments highlight a general lack of life insurance cover across the board. One in three Britons have no cover at all whilst a further one in three have not updated their policies in five years. Keith Clark, a Fellow of the Chartered Insurance Institute, is keen to encourage regular checking of policies to ensure that they are always relevant: ‘you should always check that the cover you have is suitable for your present needs. Life can bring with it several changes and what might have been a reasonable level of cover a few years ago may not now match your existing arrangements. For example you may have higher life style commitments, an addition to the family, higher mortgage or debts.’

The ABI’s findings run contrary to research conducted by insurance provider AXA, which state that 71% of Britons have taken out at least one insurance policy as opposed to only 45% of Italians and 53% of Germans and Spaniards. However, they also acknowledge that only 20% of Britons have taken out any income protection insurance to safeguard against prolonged absence from work, a major problem for the self-employed.

The most common reasons given for not taking out any form of life insurance are that cover is too expensive (23%) and that it is not necessary (21%). Graham Harvey, managing director of protection at Axa, is alarmed by these discoveries: ‘It is particularly worrying to see how many people say they think protection insurance is either too expensive or that they don’t need it and this underlines the educational job that is still required to ensure more UK adults view adequate protection as a key part of their long term financial planning.’

Many people do not fully realize that taking out life insurance at a younger age is more financially beneficial than leaving it until later in life. Keith Clark states: ‘There is a tendency when you’re young to think that you will live forever and that life insurance is for old people. But what will happen if you are suddenly taken ill and unable to work? You might be able to survive on sickness benefit but you wouldn’t have a very good standard of living. Under these circumstances, the right sort of insurance could make all the difference.’

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