Life Insurance for Self-Employed Individuals
Being self-employed gives you freedom to work independently, but the flexibility comes with managing everything on your own. Unlike regular salaried employees, there’s no employer to offer benefits or security. That’s why life insurance is important for self-employed people to fill that gap. It offers personal coverage that can protect your business and family if something unfortunate occurs. We’ll explore how life insurance for self-employed people works, factors that affect your premium, and what types of policies can fit your income.
Quick links
- Why Life Insurance Matters When You’re Self-Employed
- What Is the Best Life Insurance Policy for Self-Employed People?
- What Affects Your Life Insurance Premiums if You’re Self-Employed?
- How to Decide the Right Coverage Amount
- Are Life Insurance Premiums Tax-Deductible for Self-Employed People?
- How to Buy Life Insurance If You’re Self-Employed
- FAQs on Life Insurance for Self-Employed
Key Takeaways
Self-employed individuals don’t get employer life insurance, so personal coverage can be important.
You can choose between permanent or term life insurance based on your budget, business stability, and life goals.
The premium on your policy can vary based on age, health, income, and coverage.
Why Life Insurance Matters When You’re Self-Employed
If you work as a freelancer, gig worker, or small business owner, you take charge of your work and responsibilities. But what if something unexpected happens? That’s when life insurance for self-employed people comes into the picture. It can offer a secure financial safety net to cover your business expenses and your family’s cost of living in case you die. Here’s why it matters:
You Don’t Get Coverage From an Employer
Unlike salaried people, you don’t get employer perks like group life insurance or disability coverage. So if life takes an unexpected turn, it could be financially difficult for your loved ones. Life insurance can help bridge the gap, helping protect the future of your business as well as your family.
Family and Business Debts Still Need Protection
As a self-employed worker, you might have business loans and mortgages. With life insurance, you can help ensure that these financial obligations do not become liabilities for your family when you pass away. You can help provide financial support to cover up for your loans and fund long-term family responsibilities like education, healthcare, and more.
What Is the Best Life Insurance Policy for Self-Employed People?
The best life insurance policy for you is one that aligns with your life goals. You may choose between permanent or term coverage, depending upon your financial stability and current situation. Here are some options you can choose from:
- Term life insurance: It’s suitable for coverage of typically 10-30 years, at a premium that is typically more affordable than permanent coverage. You may choose a term policy if you would like to ensure security until you fulfill major responsibilities like paying off a debt or funding a child’s education.
- Whole life insurance: This is a type of permanent life insurance policy that offers lifetime coverage, generally at a higher cost than term coverage. It also includes a cash value component that can grow over time and can be accessed via withdrawals or loans. It can be a good option for those who want to leave a legacy for their family after they die.
- Universal life insurance: This policy also offers lifetime coverage. It allows flexible premiums and death benefit adjustments, making it suitable for self-employed people who may expect their income to fluctuate.
How to Pick the Right Policy if Your Income Isn’t Consistent
If your income is unpredictable and keeps changing, you may choose a term insurance policy with an affordable and fixed premium. Alternatively, you can consider universal life insurance that allows adjustments in the premium as per your income changes. However, it's important to understand that if you adjust your premiums down, you have enough cash value in the policy to cover your cost of insurance. Otherwise your coverage could lapse.
Opting for the right insurance policy based on your income helps you ensure constant coverage. Depending upon your insurer, you may also change your coverage as per your business’s growth.
Read: Advantages of Whole Life Insurance
What Affects Your Life Insurance Premiums if You’re Self-Employed?
The major factors that impact your life insurance premiums are the same as any other policyholder. Some primary factors include:
- Age and health: Getting life insurance in your younger years could be cheaper due to fewer health risks.
- Coverage need: The higher the coverage amount, the more premium you pay.
- Lifestyle: Your daily habits like smoking, drinking, or participation in high-risk activities could lead to a high premium.
- Policy type: A term life insurance comes at a comparatively lower premium than a permanent policy.
How to Decide the Right Coverage Amount
It is wise to opt for the right coverage amount with your insurance policy to ensure a premium payment that fits your budget, but still provides meaningful protection for your family. Your coverage needs may vary as per your financial obligations, dependents, and life goals.
It's a good idea to make sure that your coverage covers:
- 10x<sup>1 your annual income.
- Total outstanding on your debts and mortgages.
- Costs of funding your children's education and healthcare.
- Costs of child care for children who are still minors and elder care for aging parents, if needed.
Expert Tip
I’m self-employed and my income isn’t steady. How can I choose life insurance without overpaying or getting stuck?
You can opt for a term life insurance policy that comes with an affordable premium based on your budget. You could also consider opting for a smaller coverage amount that fulfills your major upcoming expenses. Many term policies allow conversion to a permanent policy later, so you may want to choose that option for future flexibility.
Senior Director Life Underwriting
Are Life Insurance Premiums Tax-Deductible for Self-Employed People?
Whether a premium is tax-deductible or not largely depends on who benefits from the policy, the business or the individual. Typically, personal life insurance premiums are not tax-deductible.
But if the policy is owned by the business and protects a partner or key employee, premiums may be deductible as a business expense. This, however, may vary as per the policy type or business structure, and it is recommended to consult a tax advisor for better clarity.
How to Buy Life Insurance If You’re Self-Employed
Buying a life insurance policy as a self-employed person isn’t any different from anyone else. But here are two smart tips to buy the right policy.
Use Online Platforms to Compare Options
You can compare quotes from multiple insurers at an online marketplace to get the best deal and determine how much coverage you can afford. Platforms like Ethos further simplify the process with a simple application that includes health questions without any medical exam.
Choose Policies That Match Both Business and Personal Needs
If you run your business single-handedly, a personal life insurance policy may be enough. But if your business includes investors or employees or has ongoing loans, a business-owned policy might be a better choice. You can factor in a combination of both personal and business coverage to secure your family and business continuity.
FAQs on Life Insurance for Self-Employed
Yes, you can get a life insurance policy if you’re self-employed. However, insurers offer a final quote based on factors like age, health, and lifestyle. Before getting insurance, it is better to determine how much coverage you need to fulfill personal and business obligations and what type of policy will align with your fluctuating income.
Self-employed individuals don’t get any employer benefits around life insurance. Thus, getting life insurance can be important to secure family and business from financial loss and debt obligations in case of their unfortunate demise.
The best life insurance for you is one that aligns with your life goals and fits with your varying income. To choose from, you can consider term life insurance for its affordability or a universal life policy for the flexibility to adjust the premium. If you are a high-income earner and have stable income, you can also consider whole life insurance for lifelong coverage and cash value growth at a higher premium.
Your life insurance policy should be able to cover your business and personal obligations. Ideally, it needs to be enough to replace your annual income for at least ten years1 and the cost of raising your children, including expenses around healthcare and education, to secure your family. Additionally, if you have outstanding business loans, the coverage should be enough to pay them if you die.
As long as you pay your premiums on time, your insurance policy stays active. If your business closes, your business-owned policy could be cancelled or reassigned, depending upon the insurer.
In the case of group benefits, an employer contributes a major part of the premium, leading to a low individual cost. However, self-employed people can also get close premium rates if the primary factors like age, health, coverage, and policy type are comparable. But, for some insurance companies, the income instability could be a concern.
To determine your coverage need, estimate your annual income and recurring expenses, and accordingly choose a policy. If your income is unstable, getting a term or universal life policy could be helpful. To get a clear picture of your coverage needs, you can use Ethos’ coverage calculator.
Author
Chief Underwriter
Expert review
Chief Compliance & Privacy Officer
Dec 06, 2025
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