What is self-employed life insurance?

Self-employed life insurance is designed to protect your family and other people who depend on you financially in the event of your death.

While there are many advantages to being self-employed - being your own boss, having a better work-life balance and, if you’re home-based, avoiding the daily commute - there are some financial benefits that self-employed workers miss out on, including death in service.

So, as a self-employed person, it’s always important to look into what cover would help if things don’t go to plan.

I’m self-employed. Why do I need self-employed life insurance cover?

When you are self-employed, every day at work is important. Unlike those in employment, often there is no financial back-up available and responsibility for your business lies solely with you. Whatever the size of your business, it’s important to think about what would happen to others who depend on your income if you became too ill to work or should you unexpectedly pass away, therefore.

Although death is not something any of us really want to think about, as a self-employed person there is a need to consider how expenses, loans and outstanding bills would be covered if you were no longer there. Life cover plays out a tax-free lump sum on the death of a policyholder. So, if you do pass away, the payment would allow your family to stay at home, cover monthly living costs and possibly keep your business running, should they wish to.

Working for an employer has some benefits that are unavailable for the self-employed. Life insurance for self-employed people can bring a sense of stability to a career that isn’t always otherwise predictable. Life insurance for self-employed people can provide a safety net for those you love should you die.

Unlike employment, where your family could expect some form of pay-out from your employer, self-employment relies on your ability to create other contingencies in order to provide for your family instead.

How does self-employed life insurance work?

Life insurance policies work the same way whether you’re employed or self-employed, although your reasons for buying a policy might differ. The main types of life insurance policy are:

Level term life insurance: This gives a pay-out if you die within the life (or ‘term’) of the policy. The length of this term will be pre-arranged by you when you take out the cover, as will the pay-out amount and the cost of your monthly premiums.

Decreasing term life insurance: This is designed to provide a pay-out that decreases in value with each year of the policy. With this type of cover, you set the amount and the length of the term. These policies can be used to help with a number of things such as repayment mortgages, decreasing in line with the outstanding amount you have left to pay over time.

Increasing life cover: This increases the death benefit payable each year of the overall term in order to protect against things like inflation and potential increases in family financial needs, such as university fees. Increasing life cover policy premiums also increase annually, where they remain the same throughout your policy with term and decreasing cover, so this is also something to factor in.

Whole of life cover: This runs until you pass away and is therefore guaranteed to pay-out. It is also often known as ‘life assurance’, as the pay-out is assured. Due to its nature, premiums can be more expensive, so it’s wise to compare life insurance to find the right policy for your needs.

When should I buy self-employed life insurance?

As with most kinds of personal insurance policies, the younger you are when you buy life insurance, the better. This is because at a younger age, you'll qualify for lower premiums. As you get older, you could develop health problems that make insurance more expensive or even disqualify you from purchasing a plan at all.

Life events such as getting married, buying a house, starting a family, or owning a business are also all important factors in determining when you might need life cover.

Life insurance is one of the most affordable ways to protect your family’s finances in the event of your death and, if you want to keep your premiums low, the ideal time to purchase life cover is in your mid-20s. We explain more about this here

As you reach your 30s and 40s and begin the next stage of your life, you’re more likely to have children, a mortgage, and other financial commitments. You might have also recently become self-employed after building up experience in-house, but all your outgoings still need to be paid come what may.

What other insurance products are available for the self-employed?

Life insurance for self-employed people is an important protection for your family should anything happen to you, and is one of the most cost effective ways to make sure they will always be ok. As well as the worst-case scenario, there are other situations that might warrant life insurance or other types of insurance too, however.

Self-employed income protection: Income protection will pay you a monthly tax-free benefit if you are unable to work because of accident or sickness. By getting income protection insurance, self-employed people can stop worrying about what would happen if they were too ill or injured to work in the short-term.

Self-employed health insurance: Self-employed health insurance is private medical insurance that can help protect you and your business by offering faster access to medical treatment if you fall ill, safeguarding you against waiting lists on the NHS. When you are self-employed it is essential that you receive medical treatment as quickly as possible and get back to work as soon as you can. Self-employed health insurance offers you quick access to first class healthcare exactly when you need it.

Critical illness cover: This gives a tax-free lump sum that will help to cover essential costs in the event of a critical illness preventing your return to work and threatening your financial security in the longer-term.

How do I buy self-employed life insurance cover?

There are many types of self-employed health insurance on the market, and before you buy insurance it is important that you compare self-employment life insurance quotes to make sure you are getting the right cover at the best price.

With ActiveQuote, it is easy to compare self-employed health insurance quotes online from across the UK to find the best self-employed health insurance cover at an affordable price. You can compare the best self-employed health insurance quotes online in less than two minutes to find a plan that suits you. With ActiveQuote you can also buy life insurance for the self-employed online.