Life Insurance for Small Business Contractors & Self-Employed Freelancers

If you work as a small business owner, self-employed contractor or freelancer, and you have loved ones depending on you, it is important to invest in life insurance.

There is a lot that can go wrong when you are working in construction. Hopefully you will stay safe, and your family will too. But if the worst does come to pass, life insurance ensures there is money there to take care of your loved ones after you are gone.

In this post, we will go over what you need to know about life insurance for contractors. We will discuss costs, what to look for in a life insurance plan, and more.

How Much Life Insurance Should You Buy?

When you are shopping life insurance policies, you will need to choose an amount to purchase. A good rule of thumb is to get around 10-15x what you earn. But some people choose to get up to 40x what they earn.

Remember, lost income is not the only thing you need to consider. You also need to think about your family’s debts (including your mortgage, if applicable). Plus, you might want to consider your children’s educational costs.

How Much Does Life Insurance for Self-Employed Contractors Cost?

We see a pretty wide range of costs for self-employed contractor life insurance, even within the same age bracket. A person in their 30s who does not smoke, for example, might pay between $30 and $130 for life insurance.

The cost to purchase life insurance varies based on:

• Your age
• Your sex
• Your health
• Your lifestyle
• Your occupation
• The type of policy you choose (see the next section)
• The amount of the death benefit

As a contractor, your work may involve risks that people in many other fields would not be exposed to. You can expect that to potentially drive up your life insurance costs. Some types of contracting are more risky than others, so it all depends on the specific types of work you are performing.

Types of Life Insurance for Small Biz Contractors

Freelance contractors can choose between term life insurance and permanent life insurance.

• This type of life insurance covers a term of time, usually 10 years at the lower end or 30 years at the upper end. This is the amount of time the policy will pay out for if you pass away. The premiums for this type of insurance are usually less expensive than those for permanent life insurance. It is also simple and straightforward.

• Permanent life insurance differs from term life insurance in that it does not have that cut-off. It will pay for the rest of your beneficiaries’ lifetimes. What is also nice about this type of life insurance is that you can make withdrawals from it or borrow against it. Your policy grows in a tax-deferred way as well. Remember though, it will cost you more than term life insurance.

You will need to assess the pros and cons of these two types of insurance to pick the one that makes the most sense for your personal scenario.

Example 1:

Dean is a handyman. His wife Callie is studying to become a doctor, and should graduate within 5 years. Dean’s income is not very high, and he and Callie don’t manage to save much after bills are paid. But the household’s income will go up substantially after Callie starts working.

Dean opts for term life insurance, and picks a 10-year term. If he dies, the policy will pay out until after Callie graduates and starts her job. After that, she should be okay. And in the meantime, Dean’s premiums won’t break the bank.

Example 2:

Carrie is a roofing contractor who cares for her disabled sister Meg, who is unable to perform most kinds of work. Carrie makes good money, and can afford whole life insurance.

She chooses this type of insurance because if she dies, she knows that the policy will continue to pay out with no term limits, ensuring that Meg stays safe and taken care of.

Maybe you found one of the two stories above more relatable than the other. That might be an indication that you have figured out the type of contractor life insurance that would be suited to your situation. But an expert can help you over the phone if you need guidance during the selection process.

Is Life Insurance Tax Deductible for Self-Employed Contractors?

Speaking of costs and benefits, you may be wondering if you can deduct the cost of life insurance from your taxes. The answer is no.

This may come as a surprise, since there is a deduction you can take for your health insurance when you are self-employed. But alas, this just does not apply to life insurance premiums.

Now, what we stated above is the case if we are discussing life insurance for yourself.

If you happen to have any employees, and you are buying life insurance for them as a benefit, then yes, you may be able to deduct it. This is the case whether you operate as a sole proprietor, LLC or S corporation.

Not every contractor qualifies for this deduction while covering employees. To find out whether you qualify or not, you will need to consult with a tax professional.

Must-Have Insurance Coverage for Freelancers

We’ve answered some of your questions about contractor life insurance. How do you decide on one policy over another? Let’s go over some key considerations when you are selecting a freelancer life insurance plan.

• Type of policy: As already discussed, you will need to decide whether term or whole life insurance makes the most sense for you. Neither is “better” than the other in general; but one or the other will be more logical given your individual needs.

• Amount of benefit and term: Make sure you are choosing a life insurance policy for contractors that will pay out an adequate amount over a long enough time period to take care of your family. How much that is will depend on your family’s bills and lifestyle.

• Riders: Many life insurance companies offer riders. By purchasing a rider, you can look forward to more benefits. An example of a rider is one that would permit you to withdraw from the death benefit for a specific purpose while you are still alive. For example, this might be available if you need extra money specifically to pay for healthcare.

• Company reputation: Make sure the life insurance company you are doing business with is well-established, with a strong reputation. Check on their financials. To be able to pay out on the policy, they need to demonstrate long-term solvency.

• Customer service: It is important to be able to depend on your life insurance company for fast, reliable customer service. Remember, if something happens to you, this is the company your family is going to depend on after you are gone. Test out the customer service team yourself to make sure that you can trust them with your family’s financial wellbeing.

Where to Get A Contractor Life Insurance Quote

We recommend shopping for contractor life insurance at Everyday Life. This company makes it fast and easy to compare a wide range of life insurance policies from companies like Assurity, Fidelity Life, Legal & General, SBLI and TruStage. Since Everyday Life is a third party, it is able to provide unbiased services.

• Find terms as low as 10 years, or as high as 30 years.
• Insurance policy benefit amounts for term life insurance range from as low as $5,000 to as high as $2 million.
• Whole life insurance policies range from as low as $5,000 up to as high as $100,000.
• Other features and benefits vary from policy to policy.

The process of shopping for contractor life insurance with Everyday Life is easy. You answer a few questions about your background, and within moments, Everyday Life suggests policies that will suit your needs. If you have questions, you can call and ask a licensed expert. Once you choose a plan, you can go ahead and apply.

Our experience with Everyday Life has been excellent. We have found their experts to be knowledgeable, friendly, patient, and willing to take as much time as needed to get answers to questions and personalized advice.

Click below for customized quotes on contractor life insurance from Everyday Life.