Having a life insurance plan may be essential for self-employed individuals looking to protect their family/loved ones or business from unexpected financial losses.

Without life insurance, the risks of being self-employed could be far greater than most people realise. This article will explain why you should consider getting self-employed life insurance.

Do I need life insurance if I'm self-employed?

Even if you are self-employed, you may still need to consider taking out a life insurance policy. Life insurance can provide financial protection for your family and/or loved ones in the event of your death.

Also, it will help ensure that any financial obligations or debts you leave behind are taken care of. In addition, if you have dependants, such as children, life insurance could provide them with the funds needed for their future.

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Risks of being self-employed without life insurance

It's never nice to think about the risks of not having life insurance or illness cover, but it's important to understand them.

The most common risks include:

  • Leaving your family and/or loved ones with no income in the event of your death
  • Not being able to pay off any debts you have
  • Loss of business due to your death
  • Being unable to pay funeral costs
  • Unable to receive sick pay or long-term disability benefits
  • Inability to provide for dependants such as children

Please note: The insurance products offered by Cavendish Online have no cash-in value at any time. If you stop paying your premiums your cover will stop, your policy will end, and you will receive no benefit. If you have not claimed before the end of your chosen policy term, the policy will end, and no benefit will be paid.

If you are facing financial difficulties and can no longer afford your premiums, please contact your insurer as soon as possible to stop the plan from lapsing automatically. They may have a scheme that allows you to keep the cover.

What type of life insurance do I need?

There are several types of life insurance available to self-employed people, so it is important to identify the type of policy that provides the most suitable cover for your individual circumstances. Your options include:

Whole life insurance

Whole life insurance is also known as life assurance or permanent life insurance. With a whole life policy, you will have the peace of mind knowing that your loved ones are taken care of should you die. Unlike other types of insurance, whole life policies do not have a set term and can provide cover until death.

With whole life insurance, your family/loved ones would receive a lump sum payment upon your death, whenever that may be.

Since a payout is guaranteed, whole life cover tends to be more expensive than the other options listed below. Your premiums are fixed unless you choose increasing cover.

Term life insurance

Term life insurance could be the perfect choice for self-employed people looking for short-term financial protection. Unlike a whole life policy, you can choose the length of your policy term.

With term life policies, you can select a level of cover that suits your needs and budget. Premiums are typically much cheaper than whole life cover as a payout is not guaranteed. Term life insurance premiums are typically fixed unless you choose an increasing policy.

Relevant life insurance

Relevant life insurance is a life insurance plan that can be bought by a company, even if you are the only employee at that company. Relevant life insurance can act as a death in service benefit, making it ideal for those who are self employed through their own limited company.

There are a range of products designed for businesses. If this interests you, please take a look at our Business Protection page.

Critical illness cover

Critical illness cover can provide invaluable protection for self-employed people, their family and/or loved ones in the event of a critical illness diagnosis. It could help provide financial security and peace of mind, allowing you to focus on recovery without having to worry about how you will pay your bills.

Should you be diagnosed with a covered illness or become severely injured, and your condition is covered by your plan, you may receive a lump sum payment.

This could be used to cover medical costs or make up for any lost income due to time away from work. It could also help with outstanding debts, such as a repayment mortgage or credit cards, helping to ease the financial burden during tough times.

Examples of critical illnesses and injuries usually covered are:

  • Heart attack

  • Stroke

  • Cancer

  • Loss of limb

  • Becoming deaf and/or blind

Please note: each insurer has different terms and conditions, so be sure to compare plans before purchasing to ensure you have the cover you want.

You may also want to look at the Association of British Insurers (ABI) Guide to minimum standards for critical illness cover

Talk to a Critical Illness expert today...

Income protection

Income protection could be an invaluable asset for self-employed people and their families. It may provide financial security in the event of illness or injury, protecting your income when you’re unable to work.

You could receive regular monthly payments from your insurer to help cover your living expenses and other costs while you’re off work.

This may be particularly useful if your main source of income is through self-employment, as it could help to make up for any loss of earnings during times of illness or injury. Income protection is especially useful if you don’t have a sick pay plan in place.

Things commonly claimed upon are:

  • Mental health
  • Back pain
  • Cancer

This type of plan usually comes with a pre-set deferment period (a waiting period) before a potential claim would pay out. For example, if you only have one month of ‘sick pay’ set aside, you could set up the plan to pay out after that. If you have 6 months of ‘sick pay’ then you could set up the plan to start paying out after 6 months.

This waiting period is decided at the start of the plan and can’t be changed, so make sure to talk to an adviser about what would be best for you. Usually plans with longer deferment periods are cheaper.

Family income benefit

Family income benefit is a type of policy that pays out a regular income to your family in the event of your death. This type of cover could help protect against financial hardship for your family/loved ones after you have passed away. Providing them with an ongoing source of income to cover costs such as childcare, bills and mortgage payments.

From a successful claim, your family or loved ones would receive monthly or annual instalments to help them maintain their current standard of living without you.

Get the right package for you

How much life insurance do self-employed individuals need?

When it comes to determining how much life cover you need as a self-employed individual, there are a few factors to consider.

It is important to think about your current financial situation and the future needs of your loved ones. You should also take into account any additional costs, such as funeral expenses, inheritance tax, or any debts that may have to be paid off after your death.

How much does self-employed life insurance cost?

Like most things, there isn’t an answer that fits all. Costs depend on the type of plan(s) you opt for, your age, health and lifestyle.

If you are unsure which option(s) are best for you, please get in touch with one of our advisers who can compare and recommend a plan or package based on your circumstances and needs.

You can call us on 01392 436193 (Monday – Friday: 9am – 5.30pm)

Apply for life insurance cover in minutes

Making sure that your family is financially secure in the event of your death should be a priority for any self-employed individual. Taking out life insurance may provide peace of mind, knowing that you have done everything possible to help ensure their financial security after you are gone.

With our easy to use online service, you can apply for term life cover in a matter of minutes. All you need to do is enter some basic information, and we'll provide a range of quotes from leading providers. For anything else, or if you're unsure about which type of policy is best for you, our experienced advisers are always on hand to help.

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