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How to Get Life Insurance for Self-Employed Individuals

September 18, 2023
Our goal is to educate and advise on life insurance options, so you can feel confident in making the right choice, whether that’s through Quotacy or somewhere else. To ensure we provide accurate and trustworthy information, our writers follow strict editorial standards.
Life insurance is essential for self-employed individuals, whether you’re a business owner, freelancer, independent contractor, gig worker, or pursuing other entrepreneurial endeavors. Without the safety net of employer-provided benefits, securing your financial future and that of your loved ones becomes a personal responsibility.

In this article, we’ll explore how to get life insurance if you’re self-employed and tips to ensure you get the best policy that aligns with your needs and situation.

Table of Contents

Why You Need Life Insurance If You’re Self-Employed

Life insurance is more than just a financial tool. If you have anyone who depends on you, life insurance is important for their protection. If you died unexpectedly, would those you love struggle financially?

Consider these questions:

  • Could your family afford the immediate costs of a funeral?
  • Would they be able to maintain their standard of living without your income?
  • Is remaining in their home possible without your financial support?

Life insurance can provide the much-needed peace of mind and financial back-up should something tragic happen to you. And without the cushion of employer-provided benefits, such as group life insurance, self-employed individuals face unique vulnerabilities.

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What Are Your Life Insurance Options?

There are two main types of life insurance: term life insurance and permanent life insurance. Choosing between these depends on your financial goals, budget, and family needs, and you might even find that a combination of both suits you best.

Term Life Insurance

Term life insurance is the most straightforward type of life insurance. It’s also the most affordable, making it a popular choice for families.

  • Duration: Term life insurance provides coverage for a fixed period, ranging from 10 to 40 years, depending on what you choose.
  • Coverage Amount: You can select an amount ranging from $50,000 to several million dollars, based on your financial needs and obligations. This is the amount paid to your beneficiaries.
  • Cost: The younger and healthier you are at the time of purchase, the more cost-effective the policy will be. Once you select a term, your rates are locked in for that duration, offering predictability and ease of planning.

If you pass away during the term, your beneficiaries receive the death benefit proceeds tax-free. However, if you outlive the term—which is what all families hope for—your coverage simply expires.

Most policies do give you the option to renew or convert the coverage if you decide you want to remain insured. Learn about how these options work: What Happens When Term Life Insurance Expires?

Permanent Life Insurance

Permanent life insurance refers to a category of life insurance policies designed to provide coverage for your entire life. This category includes specific types such as whole life and universal life insurance.

These permanent policies set themselves apart from term insurance with some unique features, but they are much more expensive.

  • Duration: Permanent life insurance provides coverage for your entire life.
  • Coverage Amount: Coverage amounts vary from $5,000 to several million dollars, based on your financial needs and obligations.
  • Features: Permanent life insurance offers attractive features such as cash value accumulation, potential dividends (in the case of whole life insurance), and flexibility in premium payments (with universal life insurance).
  • Cost: Permanent life insurance premiums are more affordable when you are younger and in good health. However, these rates can still be 10-20 times higher than term life insurance.

Get a more in-depth look at term, universal, and whole life insurance to help you determine which type is best for you.

Comparison of Monthly Premiums: $500K Term vs. Universal vs. Whole Life Insurance
Applicant: Healthy, Non-Smoking Male
AgeTerm Life - 30 YearUniversal LifeWhole Life

Why Term Is Probably the Best Choice for Self-Employed People

Term life insurance is often the best choice for most people because of its simplicity and affordability.

  • It offers a financial safety net during crucial years, like when you’re raising children or paying off a mortgage.
  • It offers more coverage for less premium compared to whole or universal life.
  • Rates are fixed, meaning they’re easy to budget for.
  • Can often be renewed or converted if coverage is needed after your term is over.
  • Policies can be customized with riders.

Riders You Should Know About

Riders are optional benefits you can choose to add on top of your base life insurance policy. They’re a convenient way to customize your coverage so it’s tailor-fit to your unique needs.

Popular riders you should consider:

  • Accelerated death benefit rider: This rider is typically free and automatically included on most policies. It gives you access to some amount of your policy’s death benefit if you are diagnosed with a terminal illness.
  • Disability income rider: This rider provides a supplementary income if you become disabled.
  • Waiver of premium rider: If you become disabled, this rider allows you to skip paying premiums while still keeping your coverage active.
  • Child rider: This rider provides a small amount of coverage on all minor children. It also provides guaranteed future insurability and is convertible into a standalone permanent policy.

A basic term life insurance policy doesn’t provide you with living benefits, as the purpose is to provide your loved ones a death benefit if you die. But certain riders will add living benefits, such as the terminal illness accelerated benefits described above. Learn more: Your Guide to Life Insurance with Living Benefits.

How to Get Life Insurance If You’re Self-Employed

Follow this simple guide to find coverage for your unique needs.

  1. Decide Your Budget: First, figure out what you can comfortably pay for life insurance each month. Knowing your budget will help you decide on the type and coverage of the policy to get. For example, a budget of $75-200 per month will give you different options than $20-40.
  2. Choose the Right Coverage: Decide between term life insurance or permanent life insurance.
    • Term life insurance: Commonly chosen because it’s easy to tailor to your budget and needs.
    • Permanent life insurance: Consider this if you have long-term obligations or family members relying on you for life. If traditional whole or universal life insurance seems too costly, look at guaranteed universal life insurance, which offers lifelong coverage at a lower rate without prioritizing cash value accumulation.
    • If you need some of both, laddering life insurance policies is a great strategy.
  3. Free and Unbiased Assistance: If you’re uncertain about your needs, contact us at Quotacy for a free and unbiased life insurance needs analysis.
  4. Get Quotes: Interested in term or guaranteed universal life insurance? Use our online quoting tool to instantly see prices. Experiment with different terms and coverage amounts to find a policy that suits your budget. If you’re looking for whole or universal life insurance quotes, complete this form.
  5. Apply Online: It only takes a few minutes to fill out the online application. Once submitted, a dedicated agent will take over to guide you through the process.
  6. Agent Assistance: Our agents specialize in finding the insurance company likely to offer you the best rate. We can provide products from various companies, and as a fiduciary, we prioritize your needs over the insurance company. You can trust us not to sell you anything unnecessary.
  7. Underwriting Process: After submitting your application to your chosen insurance company, it undergoes a review. If approved, you’ll receive a final offer. If this price is higher than your initial quote, your Quotacy agent will help you find options that better fit your budget.

How Much Life Insurance Coverage Do I Need?

Some people like to figure things out on their own while others prefer just to ask an expert. For the latter, you can contact Quotacy for an expert needs analysis to help you narrow down how much coverage you need. For the former, this section is for you.

Coverage Amount

Determining the right coverage amount is essential to ensure that your loved ones are adequately provided for. The most important factors to consider include:

  • Income Replacement: How much income would your family need to maintain their current lifestyle if you were no longer there to provide?
  • Debts and Expenses: Consider mortgages, loans, and other financial obligations that you want to be covered.
  • Future Needs: Think about future expenses, like children’s education or spouse’s retirement.

For the DIY-ers, check out our free life insurance needs calculator to help determine your coverage amount.

Coverage Length

Choosing the right duration for your life insurance coverage is equally vital. The term should align with your financial responsibilities and life milestones. Key factors to think about are:

  • Dependents’ Age: How old will your children or dependents be at the end of the term? You might want coverage that lasts until they are self-sufficient.
  • Mortgage or Debt Payoff: Align the term with the time it will take to pay off significant debts, like a mortgage.
  • Retirement Planning: Consider how your financial picture will change when you or your spouse retire, and choose a length that matches those needs.

Is Life Insurance Tax Deductible if You’re Self-Employed?

Unfortunately, no. Life insurance premiums are not tax-deductible if you’re self-employed.

However, if you’re a business owner, there are circumstances where you might be able to deduct life insurance premiums as business expenses. Learn more here: Is Life Insurance Taxed for Policy Owners or Beneficiaries?

Tips to Get Your Best Price

Being self-employed comes with its own set of challenges, and paying for your own benefits can feel overwhelming. Fortunately, you can find ways to secure life insurance without breaking the bank. Here’s advice on how to get the best price:

  • Shop Around: Different insurers underwrite policies differently, so quotes can vary widely. Use an independent broker, like Quotacy, as they have access to multiple insurers and can help find the best match for your situation.
  • Understand Your Needs: Determine the right coverage amount and length based on your specific needs. Over-insuring can lead to unnecessary costs, while under-insuring can leave your loved ones unprotected.
  • Consider Your Health: Taking care of your health may help you get a better rate. Some insurers provide discounts for non-smokers, maintaining a healthy weight, or other lifestyle factors.
  • Buy ASAP: Buying life insurance at a younger age can make it more affordable. As you grow older, the rates tend to increase, and you might even face the risk of becoming uninsurable.

As an independent life insurance broker, our agents don’t work for the insurers, they work for you. But don’t take our word for it; see what our clients have to say

Compare Term Life Insurance Quotes & Apply Today

Securing life insurance as a self-employed individual is a vital step in protecting your financial future and the well-being of those you love.

We know that with so many options available, purchasing life insurance might seem daunting. That’s why we’re here to assist you in finding the right policy that aligns with your specific needs, budget, and objectives. If you’re uncertain about taking the next step, our buyer’s guide is a great place to start.

If you’re ready or at least curious about what a policy may cost, get free and instant term life insurance quotes now. Compare policies and pricing in peace. We’ll be here when you’re ready to apply.

But remember, no one knows what may happen tomorrow. If you have people depending on you, now’s the time to start the process.

Note: Life insurance quotes used in this article are accurate as of September 18, 2023. These are only estimates and your life insurance costs may be higher or lower.


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