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Company directors who are self-employed must ensure they have life insurance because they are "responsible for all of their own benefits", according to the Association of British Insurers (ABI).
A person leaving regular employment has to give up some life insurance that their employer has been providing in the past, as well all other benefits, so all the responsibilities will lie with them when they go it alone.
Life insurance is also particularly important because self-employed company directors usually have no alternative source of income if they are unable to work, the ABI warned.
The ABI estimates that one in three Britons have no life insurance and a further one in three have not renewed their life insurance cover in five years, so may be underinsured.
In 2005, Swiss Re, the worlds largest life and health reinsurer, estimated that there was a £2.3 trillion protection gap between the expenses of UK families and what was actually covered by life insurance policies.
Nick Kirwan, head of health and protection insurance for the ABI, said: "People should really think: Hang on, Im on my own now, what if my health lets me down?
"Because, if youre self employed, absolutely everything does depend on you being healthy and being able to do your job."
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