Life insurance for self-employed people
When you’re self-employed, protecting your family can become even more of a priority. Life insurance can help, but what’s the right type of life insurance for self-employed people, and how much does it cost?
Recent research by our parent company, OneFamily Group, found that non-salaried workers in the UK, such as freelancers, temporary workers and other self-employed people, are much less likely to have life insurance.
Having an irregular income can make it difficult to commit to regular payments, but the reduced job security that comes with being self-employed can mean it’s even more important to have protection in place than it is for a salaried worker.
Before you decide if you need life insurance or not, it’s important to be fully aware of how cover can help protect your family and understand what type of life insurance you need.
So, should you have life insurance as a self-employed person?
To put it simply, life insurance can help protect your family financially if you die.
A life insurance payout can help cover essential household costs, such as rentl or bills and could be used to pay off any debts you have at the time of your death, such as your mortgage.
Anyone can benefit from life insurance, but self-employed people even more so. This is because the families of self-employed people are unlikely to receive Death in Service benefit, which is usually paid by employers if you die while still employed.
Even if you’re wary of committing to a regular payment when your income varies from month to month, life insurance might be easier to fit into your budget than you think.
What type of life insurance should you get if you’re self-employed?
When we talk about life insurance, we’re usually talking about term life insurance. With a term life insurance policy, your family will receive a payout if you die during your policy term.
There are two main types of term life insurance to choose from.
Level term life insurance
When you take out level term life insurance, your policy will pay out an agreed sum if you die during the policy’s term.
Neither your payout nor your premiums will change during your policy (unless you make changes to it).
Decreasing term life insurance
The payout from a decreasing term life insurance goes down over time throughout the length of the policy. It’s usually chosen because the policyholder anticipates needing a smaller payout if they die later in life, for example when they’ve paid off more of their mortgage.
Premiums for decreasing term life insurance are often cheaper than those for level term life insurance.
Should I get critical illness cover as a self-employed person?
We understand that, when you’re self-employed, being too ill to work can lead to a loss of income, which can be stressful to both you and your family.
If you’re worried about your household costs being covered if you become ill, there are two ways you can make sure you and your family are protected: income protection and critical illness cover.
How does income protection work?
Income protection will pay out a regular income if you have an accident which prevents you from doing your job or if you become too ill to work.
It will pay out for a fixed period of time, usually up until you’re old enough to retire, when you’re able to return to work or when you die. These payments tend to be around 70% of your gross earnings (the amount you take home each month after tax).
However, an income protection policy won’t pay out immediately once your claim is made. It can take anywhere from four weeks to two years for you to start receiving payments. You’ll be able to find out what this waiting period is before you agree to take out your policy.
It’s also worth noting that, depending on the type of income protection policy you take out, your premiums could change over time.
How does critical illness cover work?
A critical illness cover policy will pay out a single lump sum if you receive a diagnosis that is covered by your policy.
This is a one-off payment, it won’t pay continue paying out like income protection does. You’ll usually receive your payout immediately after making a claim, as long as it’s accepted.
The amount you’re covered for is flexible. You can choose any amount between our maximum and minimum cover amounts.
The premiums on your critical illness cover policy are fixed and won’t change, unless you choose to make changes to your policy.
At Beagle Street, we offer two types of adult critical illness cover: additional critical illness and life insurance with critical illness. You must have a Beagle Street life insurance policy in your name to take out either.
Life Insurance with Critical Illness
This type of critical illness cover adds an extra payout condition to your life insurance policy. This means that, if you have a critical illness diagnosis, you’ll receive the full sum assured, and you won’t receive another payout if you die.
Your life insurance policy ends once your payout is made, and your premiums will stop.
Life Insurance with Additional Critical Illness
This is an add-on to your life insurance policy. It comes with a separate sum assured that pays out only if you’re diagnosed with a critical illness.
It doesn’t affect the payout for your term life insurance policy, so even if you make a claim for critical illness cover you’ll still get the payout from your life insurance when you die.
Things to consider before taking out life insurance when you’re self-employed
Are life insurance premiums tax-deductible for self-employed people?
No, life insurance, including critical illness cover, is a type of personal insurance, so your premiums aren’t tax-deductible.
However, if your insurance policy is for business purposes, such as protecting your employees, you can claim tax back on your premiums..
You, or your beneficiaries, won’t need to pay tax on the payout for your life insurance policy or your critical illness cover.
Can you fit a life insurance policy into your budget as a self-employed person?
Depending on your individual circumstances and how much cover you need, you could be paying as little as £6 a month* to give your family some much-needed peace of mind in case something happens to you.
With a Beagle Street life insurance policy, your premiums are also fixed and will never change (unless you make changes to your policy), so you can rest assured you won’t suddenly be surprised with a higher premium on a month when your earnings were lower than usual.
Want to find out how much you can get covered for? Use our quick quote tool to find out, with no obligation to go ahead with the quote!
*Based on a 30 year old non-smoker, £200K decreasing term cover for 20 years.
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Joint life insurance policies
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Find out how much life insurance could cost with Beagle Street
Our simple, online quick quote tool will let you know how much cover you can get and how much it’s likely to cost you. There’s no commitment to take out a policy.