Life insurance is an important part of your financial life if you support a family. Primary income earners, caretaking spouses, and other household contributors need life insurance to protect their family from an unexpected loss of income in most cases. Unless you have enough money saved to self-insure, you need life insurance. Follow along with this insurance guide for the self-employed to learn more about getting the right life insurance lined up for your needs, and what to do if you have a little too much.
Getting life insurance while self-employed
Unlike buying a home with a mortgage, getting life insurance while self-employed is a fairly simple and straightforward process. The best place to start is an insurance aggregator that allows you to enter basic personal and health information and get quotes from multiple insurance carriers at once. This helps you save time in research and find the best deal.
Most life insurance is priced at a cost per thousand dollars of coverage, so the amount of insurance you want shouldn’t have too big of an impact on where you get your policy. In most cases, you can complete a basic online application to get the ball rolling on a new insurance policy. Once submitted, you should hear back soon from the insurer to get the next steps in place.
Most insurance companies require a medical exam for coverage. This is a simple and quick process. Mine took about a half hour. In most insurance medical exams, you can expect to answer some questions, provide a blood and urine sample, and submit to a basic physical. This medical exam comes at no cost to you and is usually conducted by a nurse sent to your location. I did my exam at home on a Sunday morning, but there is no reason you can’t do it at work or home during regular business hours if you choose.
Balancing life insurance with costs
If you just type “life insurance” into Google, you will find a wide range of products including term life, whole life, and universal life. Some insurance products are marketed as an investment, but in reality, you are likely best off separating your insurance from your investments. To get the best bang for your buck, that means term life insurance is the best choice.
With term life insurance, you make a relatively small monthly payment for a policy. If you were to pass away during the policy’s term, your beneficiaries will get a payout equal to the policy value. For my $1 million insurance policy, I pay about $78 per month, for example.
Life insurance costs go up with age and risk. If you have health conditions like obesity, high cholesterol, or high blood pressure, you will probably pay more for insurance than a fully healthy person. Rates also go up with dangerous lifestyle choices like rock climbing or flying. To get the best possible rate, you should sign up for insurance as young as possible. I got life insurance about two years before I had my first child.
What to do with life insurance you no longer need
If you are successful in your financial life, you may find yourself at a point in the future where you no longer need life insurance. If you have plenty of savings to cover your family’s needs for a decade or more, this type of insurance is excessive in your case. You reach a point where it is no longer worth the cost. This scenario is most common for successful business owners with $500,000 or more in assets in most cases, if not $1 million+. Your family’s needs depending on many factors including your monthly budget, expected costs for education, and planned costs for medical care in old age.
Many people with term life insurance who find they no longer need it cash out a small value from their insurer or stop paying to effectively end the policy. But that is actually a wasteful decision! Rather than let your policy lapse, you can sell it. In some cases, you can get a big windfall when selling a life insurance policy.
If you have life insurance you no longer need, check out this life insurance calculator to find out what your policy may be worth.
Find the right balance with life insurance
Like most things in life and business, life insurance requires finding the right balance between cost and benefits. Life insurance protects your family from a worst-case scenario, and that’s something you can’t ignore. Following these crucial life insurance steps when self-employed ensure you have enough insurance and don’t pay too much. That’s the secret to life insurance success.