Life insurance is an important financial planning tool for anyone, but for the self-employed it’s an especially critical layer of financial security. Whether you’re an independent contractor who operates as a solopreneur or a small business owner with a few employees on board, it’s important to shop around for the best life insurance for self-employed individuals.
In addition to choosing the right amount of coverage to protect both your family and your business, you should also determine the best type of policy to meet your needs. Here is everything you need to know about picking a life insurance policy for self-employed contractors or business owners.
How to get life insurance for self-employed individuals
Understanding life insurance basics is a must before you start shopping for policies. Here’s how it works:
- You choose a plan that offers a death benefit to your beneficiary when you pass away.
- You pay a premium (which could be monthly or annually) in exchange for this coverage.
A term life policy stays in effect for a set number of years, while a permanent (aka whole life) policy lasts your entire life as long as you keep up with your premium payments. Term life is usually less expensive since the coverage period is limited, and thus, less risk for the insurer during a term life policy. A permanent life insurance policy is guaranteed to offer a payout of the benefit, but costs more.
There are several different criteria that impact your quote, including your age, health, smoking status, and coverage amount. Some companies require a medical exam; however, Ethos skips this step in favor of an online questionnaire. You’ll answer a few questions on your health history, whether or not you smoke, and your finances.
When you’re self-employed, it’s important to accurately estimate your income in order to get enough coverage. It’s also crucial to be honest with your answers. If you lie on your life insurance application, your beneficiary’s claim could be denied once you pass away, with none of your premium payments refunded.
