ProtectionSep 12 2017

Understanding insurance and the gig economy

  • To learn how the rise of the gig worker highlights the need for protection.
  • To ascertain the relationship between state benefits and income protection.
  • Understanding the protection priorities for this sector.
  • To learn how the rise of the gig worker highlights the need for protection.
  • To ascertain the relationship between state benefits and income protection.
  • Understanding the protection priorities for this sector.
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CPD
Approx.30min
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CPD
Approx.30min
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CPD
Approx.30min
Understanding insurance and the gig economy

Tom Conner, director of Drewberry, says IP should be top of the list when the self-employed are considering what cover they need: “The self-employed have no employer provided sick pay and are not entitled to statutory sick pay.

"This makes income protection insurance crucial but our 2016 survey found that only 4 per cent of sole traders had such cover – 45 per cent hoped to manage on their limited savings, 28 per cent would have to rely on state benefits [namely employment & support allowance after 28 weeks of incapacity] while almost 29 per cent said they expected to rely on their partners.

“The self-employed also need sufficient life insurance to cover any personally guaranteed loans. For sole traders with no separate business entity, business-related loans are personally guaranteed.

"Hence, in the event of death, lenders can seek repayment from the deceased’s estate. They may also target assets like cars or property to recoup the loan. This would naturally be distressing to a recent widow/widower.”

This sentiment is echoed by Alan Lakey, director of CI Expert: “IP is top of the list followed by life/CI cover and only once the essential components are in place should PMI be considered.”

Having ‘own occupation’ stipulated for IP is the easiest way to avoid complications and disputed claims for all workers, but this is even more important for the self-employed.

Mr Lakey says this is “essential” when considering the type of cover for self-employed clients.

“A ‘suited occupation’ definition enables the insurer to contend that he/she is capable of performing some other occupation - regardless of the fact  they do not currently undertake it.

" An activity-based definition is a waste of money as the degree of disability required is so harsh that few can realistically claim.  It is quite probable that the level of severity needed would result in a critical illness claim.”

Barriers to take up

Cost and awareness are often seen as the biggest barriers to better take up of protection among the self-employed.

According to Scottish Widows, almost 80 per cent of the self-employed consider a mobile phone to be essential expenditure, compared to 40 per cent who said life insurance is an essential cost.

Mr Telfer says the biggest barriers are cost, lack of transparency in the industry and lack of awareness of the need for cover.

He adds: “We have seen how the industry is evolving the proposition to make cover more affordable. Great steps have been taken to publicise the high proportion of claims that we pay. Education is key to helping the self-employed understand the risks they face.

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