There’s a shift happening in how people work and how they buy homes – especially for the self-employed and gig economy worker.
Flexibility, autonomy and the freedom to choose your own hours have made self-employment attractive but those benefits come with some real financial blind spots.
Right now, many self-employed professionals find themselves at the heart of what you might call a self-employed mortgage boom.
Specialist lenders expect the self-employed mortgage market to grow by around 67% over the next five years as demand rises and more banks adapt their criteria.
Yet despite this momentum, traditional financial planning tools are struggling to keep pace. One of the biggest blind spots? Relying on life insurance alone.
UNSTABLE AND UNPREDICTABLE
For many people working outside traditional employment, getting on the property ladder has always felt harder. Recent research shows that around 70% of gig economy workers feel their non-traditional employment status has negatively impacted their ability to secure a mortgage, with many being rejected because lenders view their income as unstable or unpredictable. Around 63% of applicants have been turned down at least once for this reason.
That creates a paradox: people are ambitious about homeownership, but the very way they earn a living makes securing finance more challenging. And when they do finally get that mortgage offer, the focus naturally turns to protection – but often in the wrong direction.
MORE THAN ONE SAFETY NET
When people start thinking about protecting their mortgage or their family, life insurance is often the first thing that comes to mind.
And it’s hugely important. It gives real peace of mind that loved ones would be financially supported if the worst were to happen.
But life insurance only pays out if you pass away. It doesn’t help if you’re unable to work because of an illness or injury – which, in reality, is much more likely to happen during your working life.
INCOME PROTECTION
And here’s the thing: most self-employed people don’t have either traditional sick pay or income protection.
Only about 6% of self-employed workers have actually bought income protection insurance themselves, compared with around 16% of employees.
What’s more, 60% would have to rely on savings if they couldn’t work for just two months, and many could struggle to pay bills or even keep up with mortgage payments. Put simply: life cover doesn’t protect your day-to-day income.
GIG WORKERS EXPOSED
If you’re in the gig economy, your income depends on the work you can do each day, and that income isn’t always predictable. There’s no sick pay, no employer-provided benefits, and no guarantee of income continuity when you’re self-employed.
This means if illness or injury stops you working, your earnings can stop. Having the right protection in place can make all the difference, giving you breathing room while you focus on getting back on your feet.
Many self-employed workers say they’d need to dip into savings or rely on partners and family just to get by if something happened which meant they couldn’t work for a period of time. And with rising living costs and the ongoing cost of mortgage payments, those savings are often limited or already stretched thin.
“Over a third of UK mortgage holders have no life, income protection or critical illness cover in place.”
This aligns with research from the HomeOwners Alliance and LifeSearch which shows that over a third (36%) of UK mortgage holders have no life, income protection or critical illness cover in place – leaving around 2.3 million people without a financial safety net.
Almost half said they would struggle to keep up with mortgage payments within six months of losing their income, and many would resort to borrowing, selling assets or reducing savings to cope, highlighting how widespread financial vulnerability can be when unexpected events hit.
ADDED VALUE
For mortgage advisers, this presents a real opportunity to add value. When you’re helping a self-employed customer secure their home, you’re also uniquely positioned to help them protect their ability to keep it.
This is where income protection becomes a crucial part of a sensible financial plan. Unlike life insurance, income protection kicks in if you’re unable to work because of illness or injury, replacing a portion of your earnings so you can continue to cover mortgage payments and household costs while you recover.
For people whose income is their business, this isn’t a luxury – it’s a safety net. In fact, according to LV=, 50% of workers say they’d feel more financially resilient if they had a policy that paid them when they couldn’t work.
And unlike critical illness cover, which pays out for specific, serious health conditions, income protection covers illness or everyday accidents that could lead to someone being unable to work, making it broader and often more relevant for self-employed customers.
CHANGING THE NARRATIVE
The idea of life insurance being “enough” is outdated in today’s world of freelance, contracting and gig work. For someone with a mortgage, business costs, family commitments and no employee benefits, income protection is what helps ensure life can continue if illness or injury prevents you from working.
As the self-employed mortgage market continues to grow, it’s more important than ever to think beyond the basics.
Life cover is essential, but it’s only one piece of the puzzle. Protecting your family isn’t only about planning for death. It’s also about protecting your ability to live.
