Female business owners playing roulette with financial future

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• 72% of female business owners have no business protection
• And over half (54%) have no financial protection for themselves and their family
• Yet 45% think it’s solely their responsibility to look after their family if something happens to them

Nearly three quarters (72%) of female business owners are risking the future of their businesses, as they have no financial protection for their business, according to new research from Aegon. In addition to this, 54% of these women have no protection for themselves and their families if they’re unable to work.

These findings come as the number of women owning and running a business rises. In 2014, 20%* of SMEs were solely- or partially-led by women, which equates to around one million companies in the UK. As this trend grows, more women will have responsibility for employees as well as for themselves and their families, so this lack of safety net has both personal and professional implications. As many as 45% of female business owners believe it’s solely their responsibility to make sure that their family has enough income if something happens to them, but only 18% have life protection, and just 6% have critical illness protection.

Over two fifths (22%) of those who have not taken out a financial protection policy think they don’t need it, and 44% think they can’t afford it. But protection policies are there to cushion people from the impact of unexpected events like illness or death, by providing the business with funds to ensure it can continue in the event of a claim. Over three fifths (61%) of female business owners admit their business would not be able to continue if they passed away, highlighting that this lack of financial planning would have a major impact on their business – as well as their family life. But life insurance is more affordable than many think. A 35-year-old, non-smoking female could take out £90,000 life insurance for only £7.01 a month**.

In the event of illness, nearly half (45%) of female business owners would rely on their savings if they couldn’t work for six months, but those savings might not help their families for long. Only 13% think their savings would last a year or more, and 22% fear they’d only last between one and three months. In addition, this isn’t likely to factor in the extra costs associated with long-term illness. Macmillan Cancer Support research from 2013*** found that having cancer can cost an individual an additional £570 a month to cover expenses such as hospital car parking and home heating.

Stephen Crosbie, Protection Director at Aegon, said: “It’s clear from our report, female business owners are playing roulette with their financial futures. In general, business owners have a greater burden of financial responsibility, with employees to consider on top of themselves and their families. This makes the lack of protection in place among this group particularly worrying.

“Protection policies should be factored in to all SME financial planning, to make sure that those businesses, and everyone in them, are covered for all eventualities. This is one additional and very real risk that business owners can take action to avoid.”

There are some positives to be taken from the research. Becoming self-employed is the biggest trigger for business owners when buying protection (69%). A tenth received a recommendation from a financial adviser and an additional 10% took out insurance because they took out a business loan, a positive sign given banks rarely now make protection cover a condition of their lending. But 68% have not spoken to an adviser about protection.

Stephen Crosbie added: “You’d expect engagement levels to be higher among business owners given what’s at stake when it comes to running a company. But given that this group is likely to be particularly time poor, there’s a real need to develop simple protection tools and information specifically for business owners.”

*Contribution of women-led and MEG-led businesses to the UK non-financial economy, Dept for BIS 2014

**Based on a healthy non-smoking 35 year old taking out a £90,000 life insurance policy over a 25-year term from Aegon

***Total cost figure includes additional expenditure and loss of income. All cost figures show the mean average for all those incurring that cost. Three-digit figures have been rounded to the nearest 10 to make them more accessible. Figures based on a postal survey of 1,610 adults with a cancer diagnosis, recruited from a database of callers to the Macmillan Support Line and visitors to a sample of Macmillan Information and Support Centres located in hospitals across the UK. The majority (95%) had received cancer treatment within the last six months. Fieldwork took place between August and October 2012.