Self employment is on the rise. Almost one-third of the workforce in the United States is self-employed, a term that includes freelancers, independent contractors and business owners. Many traditional salaried positions offer life insurance through the employer, but as an independent contractor, it’s up to you to decide how you will get a life insurance policy and how much coverage you need.
Why Do Self-Employed Individuals Need Life Insurance?
- People rely on you. Maybe you have a spouse or children who depend on your income. If you passed away, your life insurance would offer a payout to support your family.
- Your business depends on it. In the event of your death, a life insurance death benefit would help take care of business debts that your family might not otherwise be equipped to handle.
- Your family won’t incur your debts. Without the payout that life insurance provides, your family might struggle to take care of any expenses and debts you leave behind, like credit card debt or a mortgage.
How Much Coverage Do I Need?
When you work for yourself, you have the freedom to choose whatever type of insurance best suits your lifestyle. The two main categories of life insurance are term life insurance and whole life insurance. Term life insurance covers you for a set number of years, has an expiration date and is more affordable. Whole life insurance doesn’t expire until age 120 and offers cash value accumulation as well as a death payout, meaning you can benefit from your policy both while you’re living and after you’re gone. The cash value will grow tax-free, which is another advantage to whole life insurance. If you need emergency cash, you can take out a policy loan, which borrows against your accumulated cash value. However, if you don’t pay it back, you risk decreasing the amount of your death benefit.
Not sure how much life insurance to buy? A good place to start is to calculate 10-15 times your income. If you have other loans and expenses, you’ll want to factor those in as well to get an accurate picture of all your coverage needs.
Is Life Insurance Tax Deductible?
For self-employed workers paying for their own life insurance policy, keep in mind that your life insurance policy is not tax deductible. This means you cannot subtract your premiums as a business expense. Life insurance policies are typically considered a personal expense, disqualifying you from counting them toward your tax deductible expenses.
How Do I Get a Life Insurance Policy?
When you’re ready to get life insurance, you’ll first need to assemble the proper documentation. This includes proof of income, residency and identity, as well as your Social Security card. Once you have all your documents together, you’re ready to get some quotes. How much your life insurance will cost will depend on your age, health, lifestyle and what type of policy you elect to get. It’s a good idea to get multiple quotes before committing to a purchase.
Americo Senior Life can help you assess your life insurance eligibility and find coverage that fits your needs. Learn more about your life insurance options today!