Being your own boss has a lot going for it. Flexibility, freedom, the satisfaction of building something yourself.
But there’s one area where being self-employed leaves you genuinely more exposed than someone in traditional employment — and most people don’t realise it until it’s too late.
When you work for a company, there’s usually a safety net you barely notice. Death in service cover, often three to four times your salary, paid out to your family if you die while employed. Sick pay, at least for a while. Group income protection in some cases. These things exist quietly in the background.
When you work for yourself, none of that exists. The safety net is whatever you’ve put in place yourself.
No death in service. No group cover. Just you.
For an employee, death in service cover is automatic — it comes with the job. For the self-employed, there’s no equivalent. If you die, there’s no lump sum from an employer to cushion the blow for your family.
That means life insurance isn’t just a nice-to-have for self-employed people. It’s the only version of that safety net that exists.
The good news is that personal life insurance for the self-employed works exactly the same way as it does for employees — it’s just that you have to seek it out yourself rather than having it bundled in.
"No employer benefits. No sick pay. No safety net — unless you build one yourself."
Your business debt doesn't disappear
This is the one that catches many self-employed people off guard.
If you have a business loan, a commercial mortgage, or a personal guarantee on a business liability — those don’t disappear when you die. In many cases, they become personal liabilities, meaning they fall on your estate and ultimately on your family.
A business protection policy, or a well-structured personal life insurance plan, can make sure those debts are covered without your family having to sell assets or dip into savings to clear them.
What about if you're a limited company director?
There’s actually a significant tax advantage available to limited company directors that most people don’t know about.
A Relevant Life Policy allows your company to pay the premiums on a life insurance policy as a business expense — meaning the cost is tax-deductible. The payout goes to your family via a discretionary trust, outside your estate.
For a higher-rate taxpayer, this can make life insurance dramatically more affordable than paying for it personally. It’s one of the most underused legitimate tax reliefs available to company directors.
Income protection matters even more when you're self-employed
Statutory Sick Pay doesn’t apply if you’re self-employed. If you can’t work due to illness or injury, there’s no employer to keep paying you. The money stops.
Income protection replaces a percentage of your earnings — typically 50 to 70% — for as long as you’re unable to work, up to retirement age in some cases. It’s the policy that keeps everything else going while you recover.
For self-employed people, it’s arguably more important than life insurance, because the chances of being off work sick for an extended period are far higher than the chances of dying.
The self-employed underinsurance problem
Research consistently shows that self-employed workers are significantly less likely to have life insurance or income protection than employees. Part of this is awareness — the nudge from an employer HR department simply doesn’t exist. Part of it is inertia. And part of it is the assumption that it’s more complicated or expensive when you’re self-employed.
It isn’t. The process is the same, the products are the same, and the premiums are often similar. The only difference is that you have to take the initiative.
