Everyone at some point in their lives wants to be a boss. You get to control your work hours, set your work rules, and make decisions on your own. If you work for yourself, you should also take care of yourself.
For traditional corporate workers, this is easy. They can either get one through their workplace or on their own. Seeing as their income is fixed. But when you are self-employed, your income is flexible. Knowing the coverage you need may be tricky. So, how do self-employed people get life insurance? Which insurance works best for them? Read on to find out more!
How Much Life Insurance Do Self-employed People Need?
It is ideal to have 10-15 times your yearly income set aside for life insurance. If your business is your only source of income, you might need to buy additional life insurance. Typically, insurance companies use the annual income of the previous year to justify your policy.
To know how much insurance is needed, combine your resources, including your savings and cash in checking accounts. Subtract your expense and debt (financial obligation) from it to get your coverage gap. Your coverage gap determines how much insurance you need.
Life Insurance Policy for Self-employed People
There are two major kinds of life insurance; term life insurance and whole/permanent life insurance.
Term life insurance is for a term, usually 20-30 years. It is very affordable and has two kinds of premium. However, if the policyholder outlives the policy, there are no refunds unless the policy is renewed. The cost depends on gender, the kind of business, and health conditions. For these reasons, it is the best choice for young entrepreneurs.
Permanent/whole life insurance has no end date, and it last until the policyholder dies. It is more expensive than term life, but it has more benefits. Policyholders can borrow from the accumulated cash or use it as a form of retirement plan.
Hence, it has other variants; universal whole life and variable whole life. In both kinds, the premium is invested when it is well accumulated.
Overall, term life insurance is best for self-employed people. The short period of coverage allows policyholders to re-evaluate their insurance needs/coverage over time. At the expiration date, they can buy another one or opt for a permanent one.
How to Get Life Insurance When Self-Employed?
Decide the Type of Insurance You Require
Before deciding on the kind of insurance you need, decide if you need life insurance. Regardless of its importance, everyone has different financial situations. After that, determine the kind of life insurance you need. Term life seems to work fine. But how about whole life insurance? You need to weigh your options.
Determine Your Coverage
Typically, your coverage is determined by your coverage gap. The coverage gap is your financial obligations subtracted from your total revenue. Your coverage gap multiplies by 10-15 years, or by the number of years till your beneficiaries are independent, which is how much coverage you need.
Choose Your Insurer
You may decide on an insurance agent, broker, or company. But before making your choice, compare their quotes, and check their ratings and license.
Buying a life insurance policy when self-employed is almost similar to buying it as an employee. The only difference is the type of insurance purchased and the amount of coverage. If you are self-employed and in need of life insurance, we got you covered at Massive Insurance Financial Services. Contact us to get a quote for free today!