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What types of life insurance do you need if you’re self-employed?

Jimmy Rustling
Written by Jimmy Rustling

Going into self-employment is something a lot of people dream about. You have control over your work, determine your income, choose when to work, and you could earn more than your employed peers doing what you love. However, there’s the other side of the coin; the risks that come with it.

When a risk occurs, say, you fall ill or get injured while working, you assume responsibility for the lost revenue for the period you won’t be working. Besides, there are several benefits that you miss out on when you’re self-employed: statutory sick pay, maternity pay, paid leave, etc.

But is there a way to mitigate the financial risks that come with self-employment? You bet there is! There are various types of life insurance policies you can use to cover you. In this post, we discuss the five best plans we recommend for the self-employed.

Income protection

Income protection insurance helps to cover your income if you’re unable to work due to illness or an accident. With this policy, you’ll continue to receive a regular income until you’re able to return to work or per the policy.

You can either take out short-term or long-term income protection insurance, depending on your specific circumstances. With a short-term cover, you pay lower premiums compared to its long-term counterpart.

You’ll also need to decide the amount to cover depending on your expenses such as rent and household bills.

Decreasing term life insurance

You take out a decreasing term life insurance to cover long-term debts and other financial obligations. With this policy, the amount of coverage reduces at a predetermined rate as the contract nears its end.

It’s usually a more affordable life insurance option than the level term cover since the benefit payout decreases over time. You can use it to relieve your loved ones of the burden of paying your debts such as mortgage loans, business loans, or personal loans if you pass away.

Critical illness cover

Critical illness insurance protects you and your loved ones financially when you’re unable to work due to acute illnesses like heart attack, stroke, or some stages of cancer. Its benefits can help to take care of everyday household expenses for the period that your income flow will be disrupted.

It’s worth noting that not all conditions are covered under this policy. So be sure to double-check with your provider to confirm whether the conditions you’d like to insure are taken care of by the policy.

Critical illness cover is a perfect policy for the self-employed considering that there’s no such thing as an employee benefits package when you’re working on your business.

Level term life insurance

Level term insurance is arguably the most straightforward life policy. It’s designed to protect your loved ones financially if you pass away within the contract period. The benefits can help to cover your family’s daily living costs, utility bills, tuition fees, or even funeral expenses.

And the best part? Level term life insurance premiums are considerably low, making it suitable for self-employed workers living on a tight budget. Plus the amount of support remains unchanged regardless of the time a risk occurs within the contract term.

Family income benefit

Do you have dependents who would struggle without your income if you pass away abruptly? If yes, then family income benefit is the life insurance policy you might want to consider. This plan helps to keep the income flowing consistently for a set period after your demise. It pays out in the form of monthly installments which are sent to your loved ones. They can then use this support to afford their needs and maintain the same lifestyle as before.

Unlike a lump sum payout, regular incomes are easy to manage and budget for. This means your loved ones remain financially protected for an extended period.

Conclusion

If you choose the self-employment route and have people depending on your income, it’s important to seek sufficient protection to ensure that sickness or your passing away does not disrupt comfortable living. The life insurance policies we discussed above are some of the best you can take out depending on your specific needs or circumstances.

Do you have any questions on life insurance options for the self-employed? We’re happy to answer you in the comments below.

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About the author

Jimmy Rustling

Jimmy Rustling

Born at an early age, Jimmy Rustling has found solace and comfort knowing that his humble actions have made this multiverse a better place for every man, woman and child ever known to exist. Dr. Jimmy Rustling has won many awards for excellence in writing including fourteen Peabody awards and a handful of Pulitzer Prizes. When Jimmies are not being Rustled the kind Dr. enjoys being an amazing husband to his beautiful, soulmate; Anastasia, a Russian mail order bride of almost 2 months. Dr. Rustling also spends 12-15 hours each day teaching their adopted 8-year-old Syrian refugee daughter how to read and write.