By Tim Ryan, Executive Chairman, UNA

Britain is becoming the self-employment capital of western Europe, according to a report that underlines how much the financial crisis has reshaped the general attitude towards business. UK self-employment grew 8% [1] in the past year; quicker than in almost any other European country.

In fact an average of 7,700 people in the UK became self-employed each week over the past year. If these trends continue, the UK will soon look more like southern and eastern European countries, which tend to have much higher rates of self-employment.

These figures thrust the insurance sector into the spotlight once more as this growing trend breeds additional risks and cover requirements. Small and micro businesses are the lifeblood of the UK economy and by growing them would help the current transformation of our economic position — if just a small portion of these micro-businesses took on one employee each then unemployment figures would drop dramatically. They need all the help they can get to grow and they can do this by ensuring they have the right insurance policies in place so all risks are covered. It is vital that they leave no stone unturned.

When you are moving from a staff job to self-employment, you need to think about how to cope with sickness or an accident that leaves you unable to work. Yet this is also the time when you are most likely to be short of cash. You will lose the sick pay, maternity leave and other benefits that came with employment, plus you will not have access to a workplace pension scheme. In fact, according to Prudential, nearly half of all self-employed people have no pension savings at all to support themselves in retirement.

Home workers also cannot rely solely on their home policies for cover. You have to ask yourself; what can you afford; what existing arrangements do you have; do you have any dependents or liabilities and what is your attitude to risk? If you have a family or dependents it is important to make life cover arrangements to ensure debts could be paid if something happened to you as the main breadwinner. And how would you cope if you were unable to work? Sickness and accident policies will provide short-term help; other income-replacement policies will cover you for the rest of your working life.

If you work from home on a regular basis, you must be aware of the pitfalls involved. Mortgage lenders and insurers can take a dim view if a home gradually evolves into a business premises. You must keep your mortgage lender abreast about your situation.

Average home insurance policies may have a limited amount of cover for business equipment at home. But that tends to be restricted to paper-based work and certainly won’t cover any business money or any stock kept at home.
The other key insurance risks for the self-employed relate to liability — the danger that customers come to harm when they visit your premises, or that work you do or a product you sell contributes to loss, damage or injury elsewhere. Again, none of these risks will be picked up by standard home cover. Small business insurance can help plug these gaps.

Priorities will depend on how many other people rely on your income and what kind of debts you would need to pay off if you were unable to work. Whilst the numbers of those in self-employment are growing, it is vital for them to consider their insurance requirements from all angles.

[1] IPPR think-tank