As an agent or broker, you understand the importance of life insurance. You probably advise your policyholders to purchase it or consider it part of their financial plan. But have you taken your own advice and thought about life insurance for self-employed individuals?
It can be more challenging to buy life insurance as a self-employed individual. Many employers provide a small policy to their employees and facilitate the purchase of additional coverage. But when you become self-employed, life insurance is something you need to manage.
Learn more about buying life insurance when you’re self-employed.
Life Insurance for Self-Employed Individuals
Being self-employed has many benefits, and lots of people enjoy the freedom and flexibility of owning their own agency. But one thing people tend to miss is the benefits package at a large employer. One valuable benefit is a group life insurance policy paid by your employer — and the opportunity to easily purchase additional coverage to increase the benefit offered for free.
When you become self-employed, you have to create your own benefits package. This includes finding the best and most economical way to have the benefits you need — health insurance, disability coverage, and life insurance to start.
Life insurance for self-employed business owners is important. Some reasons to consider purchasing life insurance as an entrepreneur include:
- Providing replacement income for your spouse and dependents
- Paying off debts or your mortgage so your family can stay in their home
- Funding your children’s education
- Meeting requirements for business loans or partnership agreements
- Protecting your business and giving your family time to learn to run it or sell it in your absence
Determine your life insurance needs
To begin, figure out how much life insurance you need. There are many different calculators you can use for this purpose. Consider your income, dependents, and other financial factors when deciding how much life insurance to purchase. Remember the general rule to buy about ten to fifteen times your income when purchasing life insurance.
Then think about the type of coverage you want to purchase — term or whole life. Term life insurance is sufficient for many people. You can buy a policy to cover you until your children are adults or for as long as you need coverage with term life insurance. The investment and cash accrual benefits of a whole life policy appeal to others. Whichever policy you decide to purchase, gather the documents you will need for your application.
As a self-employed person, you will need to show tax returns or other proof of income. Insurance companies generally look at your last year of income to determine the amount of coverage you can purchase.
Remember, your life insurance premiums are usually not tax deductible like your health insurance or other insurance costs may be. The exception is if you employ other people and pay their benefits. In that case, you may be able to deduct the costs. Talk with your financial advisor or accountant for more tax help when it comes to your insurance premiums as a self-employed individual.
Compare rates and options
Once you have decided on a policy type and coverage level, reach out to an agent to help you compare rates and options. Shopping around will always help you find the best rate for your needs. Some insurers don’t require a medical exam for some types of coverage if you’d like to avoid an exam. With other life insurance companies, you’ll need a medical exam only in some instances if your past medical history warrants it.
Many new digital insurers can immediately provide policy approval with a quick online application. Other traditional life insurance companies may take 30-60 days to review and approve an application for coverage. If you need labs or a medical exam, it may take even longer.
Life insurance can be surprisingly affordable, especially if you purchase it when you are young and healthy. As you get older — or if you have a chronic illness or condition — life insurance costs rise.
Buying life insurance as a self-employed agent or broker is vital for your business plan. Don’t neglect this critical protection.
Self-Employed Business Owners Get Help From the American Agents Alliance
The American Agents Alliance empowers agents and brokers to thrive. We’ve partnered with various vendors and organizations to provide you with member discounts to help you run your agency. Get valuable discounts on disability insurance and other solutions when you become a member of the American Agents Alliance.
