Nationwide has launched an income protection product designed to cover self-employed workers unable to work due to illness or injury.
The product covers an income of up to £2,000 a month - or £24,000 a year - for up to 12 months and is paid monthly. Policy holders must work at least 16-hour weeks.
The high street lender has called the new product, which is underwritten by Legal & General, ‘illness and injury insurance’, as opposed to the industry standard term ‘income protection’.
Alan Lakey, director of CIExpert, told FTAdviser Nationwide’s plan “to sensibly cover the recently self-employed is extremely welcome”.
The self-employed have been one of the hardest hit demographics to come out of the pandemic. Close to half (46 per cent) of self-employed workers in January reported having had trouble paying for basic expenses, according to research by the London School of Economics.
This, in turn, has fuelled demand for better protection offerings in the self-employed space. Insurer National Friendly conducted its own research this year, which suggested self-employed workers between 25 and 44 were “market ready”, representing a “growing” sector.
Currently, just 9 per cent of self-employed workers’ incomes are protected through insurance, according to The Exeter.
Whilst Nationwide’s latest product will go some way to closing this 91 per cent gap, Lakey pointed out “a few negatives” in the fine print.
One is that it is only available to Nationwide’s members. Two is that it is a non-advised product.
“This second one is the big problem,” explained Lakey. “Because income protection is complex with many options, such as 1, 2, and 5 year payment periods, or selected retirement ages.”
Lakey highlighted the fact Nationwide’s plan ends at age 60, “whereas many plans now run to age 70”.
He concluded: “All in all, it is welcome. But it may be that many of the policyholders may not realise the plan limitations. It says up to 12 months per claim, ends at age 60, and limits claims to £2,000 per month.”