If you’re freelance, you’ve got plenty to think about already. From winning new business to delivering on it, from business admin to tax returns, you’ve probably got a lot on your plate. And if you’re anything like us, you’ve probably also worries (on many an occasion) about what would happen in the event you were too sick to work. If you have people (children and other loved ones) financially dependent upon you, it’s natural to worry about what would happen in the event you were no longer around to take care of them at all. And while we don’t like to dwell on the negative thoughts, it’s important to be prepared for all eventualities.
While there are many precautions that freelancers can take, life insurance is one of the most financially viable options.
If you’re a freelancer considering buying life insurance, you might already have been bamboozled by the options and some of the terminology. But it isn’t as daunting as it may seem! Having a life insurance policy doesn’t have to be stressful and complicated. So we’ve simplified the basics and you’ll find a guide to key information on life insurance for freelancers and the self employed.
Do freelancers need life insurance and income protection?
For self-employed individuals, income protection insurance is an important consideration. This type of insurance provides financial support in the event that you are unable to work due to illness or injury.
It can help cover everyday bills, such as mortgage or rent payments, utilities, food, and other general living costs. It can also provide a safety net for your business if you are unable to work due to illness or injury.
There are a few questions to ask yourself when considering cover:
- How much cover would my family need if something happened to me?
- How much in savings does my family have?
- Would my business be secure without my financial input?
- How long would I need cover for?
- What debts or living expenses do I currently have?
Answering these questions will help you decide how much cover you need and what type of policy is best for your situation.
What types of life insurance are available for freelancers?
When it comes to life insurance for freelancers, there are several types of policies available. The most common types are term life insurance & whole life insurance. Each type pays out a lump sum when you die, but who exactly do they differ?
Term life insurance is the simplest and most affordable type of policy. It provides cover for a set period of time (the “term”) and pays out if you die during that period. In most cases, term life cover is cheaper than whole life insurance, as cover is only temporary.
There are 3 specific levels of cover, including:
- Level cover – Provides a fixed amount of cover for the duration of the policy. The cost of premiums also remains the same.
- Decreasing cover – the payout decreases over time, usually in line with a mortgage or loan repayment.
- Increasing cover – the payout increases over time, usually in line with inflation.
Whole life insurance provides coverage for your entire lifetime, as long as you continue to pay the premiums. This type of policy also builds up a cash value over time, which you can access if needed. Whole life cover is more expensive than term life insurance, but provides long term cover.
There are 3 main levels of cover:
- Non-profit cover – the policy pays out a fixed amount when you die, regardless of when that happens. Your premiums also cost the same throughout the policy.
- With-profits cover – The money from your premiums is placed into an investment fund. Your insurer invests the money to make a return that covers the payout value.
- Unit-linked cover – Like with-profits, except you choose which investments your premiums are placed into. The payout value is linked to the performance of the investments.
Other types of cover are also available, such as joint life insurance. This provides cover for two people under a single policy. It’s an ideal choice for couples who share an income.
Critical illness cover is another useful form of cover for freelancers. Even though it doesn’t cover death, it can cover medical costs and other expenses if you become seriously ill. It pays out if you are diagnosed with a serious illness, such as heart attacks, strokes, types of cancer and more.
Finally, income protection insurance can be used to replace lost earnings due to illness or injury. This type of policy pays out a regular income until you are able to return to work.
Benefits of Having Life Insurance as a Freelancer
- Financial security – Life insurance provides financial security for your family in the event of your death.
- Peace of mind – Knowing that your family will be taken care of in the event of your death can provide peace of mind and security.
- Flexibility – Life insurance policies are flexible and can be tailored to meet your specific needs. You can choose the type of coverage, the length of the policy, and more.
- Investment potential – Some life insurance policies have the potential to build up a cash value over time. This can be used as an investment or to cover expenses in the future.
Risks of Not Having Life Insurance as a Freelancer
- Financial hardship – Without life insurance, your family may be left with financial hardship if you die. This could mean that they are unable to pay for essential bills and expenses.
- Lack of security – Without life insurance, your family may not have the financial security they need in the event of your death.
- Leaves your business unprotected – If you own a business, life insurance can help to protect it in the event of your death. Without it, your business may be left vulnerable.
When should I buy life insurance?
When it comes to life insurance, the best time to buy is when you are young and healthy. This is because premiums are typically cheaper for younger people, and the longer you wait, the more expensive it can become.
It’s also important to consider your current financial situation and future plans when deciding whether to purchase life insurance. If you have dependents or a business that would be affected by your death, it’s a good idea to consider life insurance.
In Conclusion
In conclusion, it’s important to consider buying life insurance as a freelancer or small business owner. Protecting your family and property should be your top priority. Now that you understand the basics, it’s time to explore available options and determine the right fit for you and your lifestyle.
When comparing life policies, make sure you use an up-to-date comparison service, so that you get the right deal at the right price.
It’s also important to remember that life insurance is not a one-size-fits-all solution. Different policies offer different levels of coverage and benefits, so it’s important to do your research in finding the right policy.
