With such a large variety of career options available in the world of self-employment, there are many individuals running their own business. From artists to tradespeople and everything in between, there are a few things to keep in mind as a self-employed individual when it comes to life insurance.. Unlike careers where someone works for an established company, entrepreneurs do not get benefits unless they purchase them for themselves.
Self-employed people in Canada must purchase their own small business insurance and health insurance, yet they often take a pass on life insurance which can protect their businesses and themselves.
If you are an entrepreneur and you do not have the proper business insurance, a claim or tragedy could bankrupt your business and your life. Here is a five-step guide to life insurance for the self-employed.
Why Self-Employed People Need Life Insurance
There are a lot of rewards to being self-employed, the largest of which is having the benefit of flexibility. You can work where you want to and when you want to, and no one is looking over your shoulder. Entrepreneurs and freelancers also have all the responsibility in managing the business and administration ends of the business.
Becoming an entrepreneur has never been more accessible or profitable. Advanced technology makes it possible for almost anyone to go into business for themselves and run an efficient, successful business.
The growth of freelancers in Canada is up 71%, and much of that has to do with the pandemic. About 3.5 million people make their living as entrepreneurs in Canada. They range in age from 45 to 64. About 20% of those businesses fail within the first year, and one of the reasons is they lack sufficient resources.
Whether you are a freelancer, entrepreneur, or you work a few side gigs here and there, you need business insurance to ensure financial security. Small business insurance pays for claims associated with liability and property damage claims, and it can also replace your lost income. Moreover, life insurance plans help you maintain income when you cannot work due to a medical condition or when you pass away.
Life Insurance for Entrepreneurs
Have you thought through what would happen to your loved ones if you passed away, leaving them with no income? How would they fare if you become disabled or critically ill? Life insurance for entrepreneurs will provide income that allows your business and family to carry on when you cannot.
A term life or whole life insurance policy provides a death benefit that can help your family remain in their home, fund college for the kids, or supply any other need.
It is also possible that you may become too ill to work. Your business plan should include insurance that pays a benefit if you become disabled or critically ill. A severe car accident or a diagnosis of cancer may prevent you from working, and a critical illness or short-term disability for the self-employed could save the day.
At some point, you may decide to go into a partnership with someone. Key person life insurance is a policy that the company purchases and names the partners as insureds. The company is the beneficiary and is responsible for the premiums. If the insured dies, the insurance pays to hire a temporary employee to ensure the business keeps running without disruption.
Life insurance can also be used to cover any taxes owed by the business upon your death.
Insurance experts recommend entrepreneurs get 10 to 15 times their income in life insurance death benefits.
Disability Insurance for People Who Are Self-Employed
Entrepreneurs will tell you that it is awesome to have the freedom to work as you want. Nonetheless, there are risks involved with being an entrepreneur regardless of what type of work you do. One of the biggest risks you face as an entrepreneur is not being able to work for some reason beyond your control.
Responsible small business insurance planning includes disability insurance. Why? Because your ability to earn an income is one of your most valuable assets.
You might think of disability insurance as insurance that protects your paycheck. This type of policy will replace some of your income by providing monthly payments during the time you are not able to work. You continue to receive payments until your benefit period ends or you can return to work.
Critical Illness Insurance for Entrepreneurs
Oftentimes, we take it for granted that we will wake up and still be healthy. When you discover you have a critical illness such as cancer, a heart attack, stroke, or some other serious health condition, you have the worry over treating the illness as well as how to earn a living during the treatments.
Critical illness insurance provides a monthly payout that will help you pay your mortgage and other daily living and household expenses. If you need to make your home disability compliant, critical illness insurance can also pay for that.
Choosing to purchase critical illness insurance may prevent you from having to tap into your investments during a difficult financial time.
Dealing with a critical illness is a stressful time for entrepreneurs and their families. Having extra funds takes away some of the worry and burden of dealing with an unexpected critical illness.
Health Insurance for Entrepreneurs
One of the main risks of being self-employed is the absence of a benefits plan for health and dental expenses. To properly protect yourself and your family, you may want to consider an individual or family plan – or even better yet – a group plan for yourself and any employees.
A group health insurance plan is much more affordable than an individual plan as it combines many individuals into the risk pool.
Insurance brokers may be able to qualify you and your employees for an affordable group health insurance plan, even though you are self-employed.
There are solutions for companies with as little as one or two employees, so speaking with an insurance broker about this option is a great way to ensure your family is protected and your costs remain affordable.
Final Thoughts
If you are thinking there is a lot to learn about self-employed insurance, you are correct. Fortunately, you do not have to do all the research on your own to figure out what types of small business insurance you need.
Our insurance experts at Hometown Life Insurance understand self-employed insurance needs and are happy to help you determine which policies will protect you, your business, and your family.
Call us today at 289-606-0103 or contact Hometown Life Insurance for a quote.
External Links
⦁ https://financialpost.com/personal-finance/business-essentials/freelancer-growth-is-up-71-per-cent-in-canada
