Why Is Life Insurance Important For People Who Are Self-Employed?

OlufisayoAugust 4, 20210420 views

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If you have struck out on your own in the business world, you have probably been careful to pick up an array of insurances covering your corporate activities and supplies. Public liability, income protection, and contents insurance are just a few examples of insurances you could have chosen.

However, with so much undoubtedly on your plate as you adjusted to the self-employed life, you could have too easily overlooked the worthiness of life insurance for your particular case. Why should you seriously consider adding life insurance to the various covers you probably already hold?

What is the purpose of life insurance?

You probably have loved ones – like a partner, kids, and possibly even an elderly relative – who depend heavily on your financial takings. Therefore, if you passed away, those people could be left with a financial black hole and struggling to figure out how to fill it.

The loss of your income wouldn’t be the only financial problem for them. There would also be the cost of your funeral to take into account, while you might have taken out a loan in your name – whether business or personal –but failed to fully pay that loan off before your death, leaving your estate to settle the issue.

Your loved ones could have to deal with all of this while suffering from the grief of losing you, too. So, by taking out a life insurance policy now, you can have faith that, should the worst happen to you, there will at least be a financial cushion for your dependants.

Why is life insurance especially crucial for self-employed people?

If you were working for an organization before you entered self-employment, you probably received something called “death in service”. This protection – if it was indeed in place – would have ensured that in the event of your death while you were still in service, your loved ones would have received a payout worth multiple times your annual salary – with 2-4 times usually the going rate.

However, as Forbes contributor Esther Shaw warns, you would have ceased to qualify for this cover upon leaving the company providing it. Therefore, if you are currently self-employed but lack a life insurance policy, you should start looking for one – as it wouldn’t just be automatically bestowed on you.

Are you considering employing anyone other than yourself?

With the self-employed making up 15% of the UK workforce as noted on the Business Advice website, many people could be leaving themselves vulnerable if they haven’t thought about getting life insurance for themselves. However, as your work responsibilities grow more demanding, you might be tempted to start employing some people who could help you to take a certain amount of that workload off your hands.

For these people, you could yourself start offering “death in service” cover as part of a broader package of company benefits. If an employee covered by this insurance dies, their loved ones could receive either a multiple of the employee’s salary or a fixed lump sum, e.g. of £50,000.

Photo by RODNAE Productions from Pexels

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