What freelancers have to know about life insurance coverage


When you begin a conventional job, there's often a scheduled ending up in recruiting during which you review the insurance policy, the retirement plan and group life insurance. Freelancers, however, have to behave as their own recruiting department and learn how to set up their own health insurance and retirement plans on their own – and yes, their life insurance policy too.

Many freelancers don't consider getting life insurance, either because they're not aware it's an option or as their partner has life insurance via a traditional employer. This can have serious financial consequences, specifically for freelancers with debt (including business debt) or dependents.

If you're a freelancer whose spouse has life insurance, there are a lot of excellent good reasons to remove a life insurance policy of your. A high level freelancer with children or aging parents, life insurance coverage is practically essential. If you are just one freelancer with no children, getting life insurance coverage could help make sure that nobody gets stuck paying off your student loans after you die.

So set up a ending up in your recruiting department – that is to say, yourself – and figure out be it time for you to subscribe to life insurance coverage.

Can freelancers get life insurance coverage?

Freelancers often think that certain types of insurance just aren't at hand. After all, prior to the Affordable Care Act, there have been a restricted number of ways to access health insurance without a traditional employer. Even with the ACA in position, freelancers have fewer choices to access additional kinds of insurance, for example short-term disability insurance, compared to their traditionally employed peers.

However, it is very easy for a freelancer to enroll in a life insurance policy. Although employers often offer life insurance coverage being an employee benefit, life insurance coverage isn't linked to traditional employment the way in which health insurance was prior to the ACA. Self-employed people have as much access to life insurance anyone else, and you may remove a life insurance policy whether your taxable income gets reported on W-2s or 1099s.

What types of life insurance coverage can be found?

Here are two popular kinds of life insurance coverage: Term life and whole life, a kind of permanent life insurance. We have an entire overview of term vs. whole life insurance, but here's the tl;dr: term life insurance covers the word in which the policy is active and whole life covers you for the entire life.

In other words, you can take out a phrase life policy that covers a specific length of time – 10 years, Two decades, 3 decades, etc. – and once the term expires, elect not to continue your policy. (Obviously, if you do not take on a new term life policy after your initial term expires, your beneficiaries will no longer receive any benefit after your death.)

People often take out term life insurance policies to pay for a particular length of time where their death may cause exceptional financial injury to their own families. For example, parents might take out term life policies to cover their children's dependent years.

Whole life plans, on the other hand, cover you for the entire life. These coverage is usually more expensive than term life insurance policies, however they incorporate a cash accumulation component referred to as policy's cash value that can grow with time.

Whichever type of life insurance you select, the finish goal is the same: Protect those you like in a way that is sensible for you.

How much life insurance coverage do freelancers need?

Freelancers, like other people, need different levels of life insurance depending on their finances as well as their beneficiaries. An individual with no children, for example, may not need life insurance coverage – unless, obviously, they fall into one of these simple seven categories. (Do you have student loan debt or mortgage debt? Are you supporting aging parents? Click that link.)

In general, professionals recommend getting life insurance within the amount of five to Ten times your annual income. Since freelancers often have annual income that varies from year to year, you can average out your previous annual earnings, pick your highest-earning year or simply use last year's income as the benchmark.

However, the “five to 10 times your annual income” recommendation is just a starting place. You will also be thinking about additional circumstances such as your debts, childcare or healthcare costs (for the surviving spouse and/or children) as well as funeral expenses. Haven Life has an online life insurance calculator to help you figure out how much life insurance coverage is the best for your family.

How can freelancers with variable income budget for life insurance?

If you're the type of freelancer who might earn $5,000 one month and $500 the following, you are aware how difficult it can be to handle your cash flow and plan for upcoming expenses. When you generate a term life insurance policy through Haven Life, you'll pay a regular monthly premium, just like you purchase medical health insurance. Here are some methods for you to make certain there's enough in the bank to pay for that premium each month, despite variable income:

Keep your lifetime insurance affordable

We've got a handful of tips and tricks to create that premium down, for example buying term life when you're healthy and young (you'll keep your same premium for the entire term, even as you become- less young).

During the flush times, put aside money for the lean times

We know it's tempting to invest every dollar you earn during one of those big-paycheck months, there is however certain to be a small-paycheck month between the near future – so conserve for it!

Use a budgeting app to handle your current and upcoming expenses

Because you have variable income, you'll need a budgeting app that permits you to arrange for both regular expenses (such as your regular bills) and irregular expenses (such as a new laptop) and budget these expenses as you earn income.

Don't consider life insurance coverage as something you'll take care of later, when you can afford it. Freelancers need life insurance as much as other people, so ask yourself whether it's time to take out life insurance and make sure your loved ones can benefit from the work you're putting into your freelance career despite you're gone.