So, you’re self-employed and one of the few people out there living the American Dream. I’d personally like to congratulate you on not having to answer to anyone. You handle your business the way it’s meant to be handled. The downside, however, is you chose the road less traveled and for that the punishment is being self-sufficient. That means providing your own benefits for you and your family. That remains the case when it comes to life insurance. Let’s discuss everything revolving around getting life insurance if you’re self-employed.
Reasons for Coverage
If you are running your own business, there is a lot more than one reason to get a life insurance policy. If you have a family that depends on your income, then the reasons are obvious. However, it doesn’t stop there. When running a company of your own or practicing your own trade, you’re often responsible for more than just your family’s life. You may need to get key person coverage in place or be required get coverage to secure that loan to take your business to the next stage development. You also can’t take advantage of the group life insurance coverage that comes with corporate employment. Don’t worry, its usually not that great because it’s not transferable. Let’s not waste time and outline the reasons you need life insurance if you’re self-employed in detail.
Family
When business is going good it’s easy to feel financially secure. Your family is doing good, the mortgage is getting paid, and the road to college looks promising. But we can never know what tomorrow brings so it’s always a good idea to get a life insurance policy in place to secure your family against the death of the breadwinner, the bacon bringer, and any other reference for food as money (I haven’t had my lunch yet). If looking into a policy for this reason make sure you get enough coverage amount to replace your income and take care of the biggest responsibilities like mortgage, debt, college expenses, final expenses and any costs that may be associated pertaining to your business. In most cases a term life insurance policy will suffice for the early years when the need for life insurance is at its highest. But always consult your agent before making a sure decision.
Key Person Coverage
While key person coverage is mostly for those with small businesses or big companies, being self-employed can often work around partnerships. If you have a partner and know they will suffer without you then key person coverage is a must. If something happens to you then you want to make sure that those who are building the business with you can continue growing and bounce back from the financial disaster that comes with you no longer being around.
Securing a Loan
Whether you’re going to go off and do your own trade or start a small business, often times we need startup capital on our road to self-employment. When talking to banks and loan officers its almost always a requirement to secure a life insurance policy for the amount of the loan. This is done for an obvious reason, if you die they still want their money. For this a no medical exam life insurance policy is usually a best bet because it expedites the underwriting process by a few weeks by skipping the exam. Often times you can get approved for coverage within a couple days to a couple hours if you’re healthy. This way your loan approval time isn’t stretched, especially if it’s a time sensitive matter. But as I said before, this is something you want to discuss with your life insurance agent because each case varies.
What Type of Coverage Should I Get?
There are a lot of different life insurance companies out there with a lot of different products but really there are only three different product types: term, permanent, and no exam life insurance. Let’s discuss them in detail and decided when you need which type.
Term Life Insurance
Term life insurance is coverage that’s locked in for a set amount of years and then set to expire. For example, if I opt for a $2 million, 20-year term life insurance policy then I will be covered for the 2 million for 20 years. During those 20 years my coverage will be locked in and my monthly premium wont got up or down during the entire time. Keep in mind you can cancel at any time, but the rate you’re approved at stays locked in for 20 years. This is known as a level term life insurance policy. At the end of the term you will have the option to convert the policy to a permanent one, cancel it, or renew it annually.
If you choose to convert the policy you will be guaranteed the same health class you were approved at 20 years ago, with the rate only being adjusted to your new age. So even if you developed cancer or diabetes in the interim, you can convert to a permanent policy. Just pay more for your new and older age.
A term life insurance policy is perfect to take care of the most vital years of growth. If you have a 20-year mortgage and 5-year-old kid. Then getting a term life insurance policy to secure those years will be enough protection to take care of the biggest financial responsibilities in case of your passing.
Permanent Life Insurance
Permanent life insurance is coverage built to last a lifetime. You have an option between a cash value policy or permanent term policy. The cash value is a life insurance policy that has an “investment” aspect to it which makes it ten times more expensive than a traditional life insurance policy. You can see my term vs whole life debate here. A permanent term life insurance policy is also known as Guaranteed Universal Life Insurance policy and is permanent coverage without the unnecessary expenses.
Permanent coverage provides a locked in rate for your entire life or in some cases to ages 90 to 121 depending on the company and the product. Personally I always recommend a permanent term for permanent coverage and you can use the savings to invest in yourself as a self-employed individual. But like most things, this is best discussed with your agent depending on your case.
This coverage is good for life long expenses like taking care of your funeral costs, hospital bills, debt, and any legal fees associated with your passing. It can also be used for estate planning if something of that nature is necessary.
No Medical Exam Life Insurance
Last but not least is no exam coverage which is great if you need life insurance fast. This can come in term or permanent although you will find more companies offering the term life insurance no exam products.
No medical exam life insurance is for the healthy individual. While there is no exam, the policies are still underwritten, by a computer. Which means it’s a little more black and white than the individual consideration taken by human reviewers. The upside to this is if you’re healthy you can get coverage really fast at a good health rating.
The downfalls of no exam plans is that they are a tiny bit more expensive than traditional term life insurance and are capped for coverage. Usually between $250,000 to $1,000,000 depending on the company. The upside is that you can get approved for coverage often in the same day. That is much faster than your typical 8-week cycle for a traditional exam policy.
These are the policies that are good in situation where speed and convenience are of the essence. For court ordered cases or loan requirements, this is a perfect life insurance policy. It’s also for anyone who simply doesn’t like needles.
How to Get Coverage
When shopping for life insurance you should do just that, shop. Never get tied down to an agent who only represent one company. Always work with an independent agent who represents many companies and can recommend the best one for you. Whether you work directly with the carrier or work with an independent agent, the cost won’t change, but you will be able to save money by shopping around and most importantly getting the right coverage in place. Not all independent agents are knowledgeable though, so make sure you work with one that knows what they’re talking about. It may be a hard task to find one so I have some good news.
Start Here
The good news is that you can do all of your comparison shopping right here. We offer all the products mentioned in this post and have worked with many self-employed individuals over the years. You can run quotes here or use the quote engine on this page. We offer our expertise and all the A-rated companies we represent at no extra cost to you! If you have any questions or want to apply for coverage give us a call at 888-492-1967 or hit the chat button below. Welcome to InsureChance!
