Life Insurance for Self-Employed Workers and Families
If your family depends on your income, life insurance can provide financial protection if you pass away.
The death benefit can help with expenses such as a mortgage, everyday bills, debts, childcare, education costs, and other financial responsibilities.
If you're self-employed, you may not have employer-provided life insurance to fall back on. Individual life insurance lets you choose your own coverage based on your family, goals, and budget.
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Why Life Insurance Matters When You Work for Yourself
Many employees receive at least some life insurance through work. Self-employed workers often have to build that protection themselves.
If you passed away unexpectedly, your family could lose your income while household expenses continue.
A life insurance death benefit can help your beneficiaries:
- Pay the mortgage or rent
- Cover everyday living expenses
- Pay off debts
- Handle final expenses
- Help with childcare or education costs
- Provide time to adjust financially after losing your income
- Help with certain business obligations or transition costs
Standalone Life Insurance vs. Life Benefits Added to Other Coverage
We help clients with more than one type of life insurance protection, and it's important to understand the difference.
Standalone Life Insurance
A standalone life insurance policy is purchased specifically to provide life insurance protection.
You choose the policy type, coverage amount, beneficiaries, and other features based on your needs.
Standalone options may include term life or permanent life insurance, depending on availability and eligibility.
Life Insurance Added to Certain Benefit Packages
Some health or supplemental benefit packages may also allow you to add a life insurance benefit.
These benefits can provide useful additional protection, but the available coverage amount, policy structure, underwriting, portability, and other terms may be different from a standalone life insurance policy.
We'll explain exactly what the added life benefit provides so you can decide whether it's enough on its own or whether separate life insurance also makes sense.
Your Standalone Life Insurance Options
Term Life Insurance
Term life insurance provides coverage for a specified period, subject to the terms of the policy.
It often has a lower initial premium than permanent life insurance for the same death benefit and can work well when you need protection during specific financial years.
Common goals include protecting a family while children are young, covering a mortgage, replacing income during working years, or protecting other temporary financial obligations.
Permanent Life Insurance
Permanent life insurance is designed to provide longer-term coverage and can potentially remain in force for life as long as required premiums are paid and policy conditions are met.
Certain permanent policies may also accumulate cash value over time.
Permanent coverage generally costs more than term coverage, so it's important to understand the long-term structure, guarantees, fees, and goals of the policy.
Term vs. Permanent Life Insurance
| Feature | Term Life | Permanent Life |
|---|---|---|
| Coverage length | A specified term or period | Designed for long-term or lifetime coverage |
| Initial cost | Often lower | Often higher |
| Cash value | Generally no | May accumulate, depending on policy type |
| Common use | Income replacement during working years, mortgage, family needs | Long-term protection, legacy, estate or other permanent needs |
| Underwriting | Varies by insurer and policy | Varies by insurer and policy |
This is a general comparison. Policy structure, premiums, guarantees, cash value, underwriting, and renewal terms vary by insurer and product.
How Much Life Insurance Do You Need?
There isn't one coverage amount that's right for everyone.
A useful starting point is to think about what your family would need financially if your income disappeared.
Income Replacement
Consider how many years your family may need help replacing some or all of your income.
Mortgage & Debts
Think about your mortgage, car loans, credit cards, business obligations, and other debts.
Children & Education
Childcare, school expenses, and future college costs may be part of the amount you want to protect.
Final & Transition Expenses
Funeral costs, medical bills, and time for your family to financially adjust can also be considered.
Life Insurance for Business Owners
If you own a business, your life insurance needs may go beyond replacing household income.
Depending on your situation, life insurance may be considered as part of planning for:
- Protecting your family from business-related financial obligations
- Buy-sell agreements
- Key-person protection
- Business succession planning
- Providing liquidity after the death of an owner
Business uses of life insurance can involve legal, tax, and ownership considerations. Coordinate with your attorney, CPA, or other qualified advisors when appropriate.
Add Extra Protection
Critical Illness Coverage
Critical illness insurance may provide a fixed or lump-sum benefit after certain covered diagnoses such as specified cancers, heart attacks, strokes, or other listed illnesses.
AD&D Insurance
Accidental death and dismemberment coverage may provide benefits after certain covered accidental deaths or serious injuries.
It is generally better viewed as supplemental protection, not a replacement for broader life insurance.
Common Questions About Life Insurance
Can I get life insurance if I'm self-employed?
Yes. You do not need an employer to purchase individual life insurance.
Standalone life insurance may be available directly to eligible individuals based on the insurer's underwriting requirements.
What's the difference between standalone life insurance and life coverage added to another plan?
Standalone life insurance is its own policy and is designed specifically around your life insurance needs.
Some health or supplemental packages may allow you to add a life insurance benefit, but that coverage may have different benefit amounts, policy terms, portability, or other limitations.
We'll help you compare the two so you understand exactly what protection you're getting.
How much does life insurance cost?
Premiums depend on factors such as your age, health, tobacco or nicotine use, coverage amount, policy type, and other underwriting factors.
Term life insurance often has a lower initial premium than permanent coverage for the same death benefit.
Is life insurance taxable?
Life insurance death benefits are generally received by beneficiaries free from federal income tax.
Certain ownership structures, interest payments, estate issues, or other circumstances can create tax considerations, so consult a qualified tax professional when appropriate.
Do I need a medical exam?
Not always.
Some applications may use health questions, prescription history, medical databases, or accelerated underwriting without a traditional exam.
Other policies may require medical records, labs, or an exam depending on the insurer, your age, health history, and requested coverage amount.
What happens when my term life insurance ends?
It depends on the policy.
Some term policies may be renewable, convertible to certain permanent coverage, or simply end after the stated term. Renewal premiums may increase substantially with age.
Review the actual renewal and conversion provisions before buying.
Does life insurance cover both accidents and illness?
Traditional life insurance generally covers death from many causes, including illness and accidents, subject to the policy's exclusions and conditions.
What's the difference between life insurance and AD&D?
Life insurance generally provides broader death-benefit protection.
AD&D is limited to qualifying accidental deaths and certain specified accidental injuries.
Can life insurance provide benefits while I'm still alive?
Some life insurance policies may include living-benefit riders that allow access to part of the death benefit after certain qualifying illnesses or medical events.
Using those benefits generally reduces the amount remaining for beneficiaries and is subject to the policy's specific terms.
Can I have more than one life insurance policy?
It is possible to own multiple life insurance policies if the total amount of coverage is supported by the insurer's financial underwriting and eligibility rules.
Some people combine employer coverage, an added life benefit, and standalone life insurance.
Protect the People Who Depend on You
We'll help you compare standalone life insurance, term and permanent options, and any life benefits available alongside other coverage so you understand exactly what you're buying.
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