According to the U.S. Bureau of Labor Statistics, 10.1% of the workforce in the United States is self-employed. If you’re among the many people choosing self-employment, it’s important to be aware of your unique life insurance needs, whether you freelance, perform gig work, or participate in any other form of self-employment.
Unlike a traditional employee, who may have access to employer-sponsored life insurance benefits, you’re likely responsible for securing your own financial safety net, making it essential to review and understand the policies available to you. In this article, we’ll discuss the specific considerations self-employed workers should have when shopping for life insurance and give an overview of the different types of coverage available.
Why do self-employed people need life insurance?
Life insurance is important for self-employed individuals for several reasons, considering their unique financial responsibilities and circumstances. Here’s an overview of why you should consider finding life insurance coverage if you’re self-employed:
Financial Protection for Dependents: Self-employed individuals may have dependents who rely on their income. In the event of the individual's death, life insurance can provide financial support to ensure that their dependents are taken care of, covering ongoing living expenses, mortgage payments, and educational costs.
Business Obligations and Continuity: Many self-employed people have business debts, loans, or other financial obligations related to their business. Life insurance can help cover these obligations in the event of the individual's death, preventing the burden from falling on their family or business partners. For self-employed individuals who own a small business, life insurance can be used as a business continuation or succession planning tool. It can provide funds to buy out the deceased individual's share of the business, ensuring a smooth transition and financial stability for the business.
Healthcare Coverage: Self-employed individuals typically don’t have access to employer-sponsored health insurance. In the event of a critical illness or disability, certain types of life insurance policies, such as permanent life insurance with a cash value policy, can provide financial support for healthcare expenses and income replacement.
Income Replacement: Unlike traditional employees, people who are self-employed don’t have access to benefits such as employer-sponsored life insurance or disability insurance. Life insurance can serve as a means of income replacement for their families in the absence of a regular salary or benefits.
Types of Life Insurance for Self-Employed People
If you’re self-employed and comparing life insurance policies, it’s important to consider the two primary types of coverage: term and permanent life insurance. Here’s how these options compare and how they may benefit you based on your career.
Term Life Insurance: Term life insurance offers flexibility and affordability, making it an attractive option for self-employed individuals with nontraditional income streams. Because you only buy as much as you need, it’s easy to tailor to life changes, such as fluctuations in employment circumstances.
Permanent Life Insurance: Permanent life insurance provides coverage for your entire lifetime, offering long-term protection for self-employed individuals and their beneficiaries. It also accumulates cash value over time, which can be utilized for business purposes, such as funding a buy-sell agreement or for expenses like healthcare or retirement planning.
Let SelectQuote Find You the Right Life Insurance for Your Needs
Looking for life insurance as a self-employed person can be overwhelming, with many options to consider. SelectQuote can help you skip the guesswork and find a policy you’re confident about. We work for you, not the insurance carriers, so we’ll take the time to get to know your unique needs and provide you with a variety of unbiased quotes in just minutes so you can find the right fit for your circumstances.
