Life Insurance for the Self-Employed (2023)

For many people, being self-employed is the dream.

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For many people, being self-employed is the dream. Being their own boss and choosing their hours is a fantastic way of life. But with no employer comes the lack of certain benefits. No sick pay and no death in service pay out can mean that if something were to happen to you, your loved ones would suffer financially.

Life insurance is an agreement whereby you pay a monthly cost to an insurer, and if you pass away during the policy, a pay-out will be made to people of your choosing.

While it may be unpleasant to think about, it’s essential to make sure that your dependents wouldn’t be left with any financial burden that could at the least, cause them stress and at the most, put them in debt.

There is a wealth of information in different places online and it can get confusing and time-consuming, which is why we have created a guide of everything you need to know about Life insurance for the self-employed.

Why is it Important if you’re Self-Employed?

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Having life insurance makes sense for anyone with financial dependents, such as a partner or children. Without it, your family would have to replace your lost income, meet mortgage and other debt payments, pay for childcare, and cover the cost of your funeral. This could cause a world of problems for people already suffering your loss, and it would be much kinder to pay for insurance that would protect your dependents from any financial burdens.

Probate can take months, or even years to be completed, and so cannot be solely relied upon.

Of course, your estate might cover some of these costs, but the value of your estate must go through probate – this is the legal process of dealing with the money of the deceased. Probate can take months, or even years to be completed, and so cannot be solely relied upon.

How does the Pay-out Work?

Life insurance pay-out is not automatic, a claim must be made after the policyholder has passed. Once the claim has been made, it can take up to 60 days, sometimes more, before the money is given to the beneficiary.

Before signing a policy agreement, make sure you are aware of who exactly the insurance pays out to and how long it takes the company to pay.

The Difference between Life Insurance & Income Protection

We compare plans from the leading life insurance providers

The two cover different things and pay differently. If you become unable to work due to sickness or injury, Income Protection will provide a regular payment so that your dependents don’t suffer from financial hardship while you aren’t working. This is similar to sick pay that would be given by a company if you weren’t self-employed. You will pay monthly premiums for Income Protection and once you show proof that you cannot work, you will start to receive the payments.

Life Insurance provides a lump-sum pay-out to your family if you pass away. In the event of your death, your dependents would not only have to deal with the loss of your income, but they would also have the burden of paying for funeral costs. The average cost of a funeral in the UK is £4k.

The Life Insurance pay-out would also help with financial commitments such as paying off a mortgage and general family expenses, as well as potentially contributing towards an inheritance for your family.

Both policies have their advantages, and as a self-employed individual, it would be helpful to have both forms of cover so that your family could be fully protected.

What is The Best Life Insurance For Self-Employed?

When it comes to finding the best life insurance for self-employed individuals,several options exist.

Term life insurance is a popular choice for self-employed individuals because it is typically less expensive than other types of life insurance. With term life insurance, the policyholder pays premiums for a set period of time and if they die during that period, the death benefit is paid out to their beneficiaries. There are two types of term life insurance: level term and decreasing term.

Level term life insurance provides a fixed amount of coverage for a set period of time, such as 20 years. The death benefit remains the same throughout the term of the policy, making it a good option for self-employed individuals who want to provide for their families in the event of their death.

Decreasing term life insurance, on the other hand, provides decreasing coverage over time. The death benefit decreases as the policyholder gets older, which makes it a cost-effective option for self-employed individuals. It is often used to cover a decreasing debt, such as a mortgage.

Over 50s plans are a type of whole of life insurance that is designed for older individuals. They typically do not require a medical exam or ask any health questions, making them a good option for self-employed individuals who may be considered high-risk by traditional life insurance companies. These plans provide a death benefit that is paid out to the policyholder’s beneficiaries upon their death.

Family income benefit policies are designed to provide for the policyholder’s family in the event of their death. Instead of a lump sum, these policies pay out a regular income to the policyholder’s family, which can help to cover expenses such as mortgage payments and other household bills.

Terminal illness cover pays out a lump sum if the policyholder is diagnosed with a terminal illness. This type of policy can provide financial security and peace of mind for self-employed individuals who may be concerned about their ability to provide for their families if they are diagnosed with a serious illness.

Critical illness cover pays out a lump sum if the policyholder is diagnosed with a serious illness such as cancer or heart disease. This type of policy can provide financial support for self-employed individuals who may be unable to work due to illness.

Income protection is another option worth considering. This type of policy can provide a regular income to the policyholder if they are unable to work due to illness or injury. It can be a lifeline for self-employed individuals who may be concerned about their ability to make ends meet if they are unable to work.

It’s important to note that the best type of life insurance for a self-employed individual will depend on their specific circumstances and needs.

Life Insurance Quotes for the Self-Employed

Each policy will be unique, but here are some quotes for Life Insurance from

For a level term cover of £100,000 that would be spread over the course of 20 years, for a young adult in their 20s (who is a non-smoker):

  1. Beagle Street – £3.26 per month
  2. Virgin Money life insurance – £3.49 per month
  3. Legal & General life insurance – £4.17 per month

For a level term cover of £100,000 that would be spread over the course of 20 years for an adult in their 50s (who is a smoker):

  1. LV life insurance – £29.27 per month
  2. Legal & General life insurance – £30.87 per month
  3. Aviva life insurance – £32.38 per month

Writing your Life Insurance in Trust

You should consider writing your life insurance in trust. Not only can this bypass the lengthy probate process, but it can also reduce or sometimes even avoid the 40% inheritance tax, and finally it allows you to specify how you would like the money to be distributed when you pass.

How Much Is Life Insurance For Self-employed?

The cost of life insurance for self-employed individuals can vary depending on a number of factors, including the individual’s age, health, smoking status, profession, type of cover and amount of cover desired. Generally, younger, healthier non-smokers, working in low-risk occupation will pay less for life insurance than older individuals, smokers or those working in high-risk occupation. Other factors that can affect the cost of life insurance for self-employed individuals in the UK include the type of policy (term vs. whole life), the amount of coverage desired, and any additional riders or features that are added to the policy.

It is important to note that self-employed individuals may have to pay higher premiums for life insurance than those who are employed by a company, as self-employed individuals are often seen as higher risk. This is because self-employed individuals may not have access to employer-sponsored group life insurance plans, and may not have the same level of income stability as those who are employed by a company.

The table below shows example quotes for a self-employed worker. Quotes are based on a non-smoker in good health, working in a low-risk occupation, for a level term and decreasing term life insurance policy with a term length of 20 years for £100,000 of cover:

Age Decreasing term life insurance Level term life insurance
20 £6.54 £5.74
25 £7.25 £6.87
30 £7.35 £6.99
35 £7.51 £8.37
40 £8.76 £11.12
45 £11.56 £15.24
50 £16.23 £22.12

It’s important to note that these are just examples and your quote may vary depending on your individual circumstances and the provider you choose.

Is Life Insurance Tax Deductible if You’re Self-Employed?

If you’re self-employed in the United Kingdom, life insurance premiums may be tax-deductible. The tax treatment of life insurance premiums depends on the type of policy you have and how you use the proceeds of the policy.

For example, if you have a life insurance policy that is taken out to protect your business, such as key person insurance, the premiums may be tax-deductible as a business expense. This type of insurance is taken out to protect the financial stability of a business in the event of the death of a key employee or business owner.

On the other hand, if you have a personal life insurance policy that is not related to your business, the premiums are not tax-deductible.

It’s important to note that the tax treatment of life insurance premiums can be complex and you should consult with a tax professional or financial advisor to understand how your specific circumstances may be affected.

Things to Watch Out for

Insurance companies can be cautious about giving cover to people with health problems, e.g., obesity, diabetes, heart disease, depression, or any other chronic condition. Serious issues can lead to higher premiums or sometimes a rejection. However, there are life insurance companies that specialise in helping customers with health problems.

Also, make sure you check your policy for any unfavourable terms, the best option is to ask an insurance advisor to read through it for you, as they will immediately spot any red flags. If they do, they will be able to advise on safer alternatives.

Compare Life Insurance Quotes For Self-Employed

When it comes to comparing life insurance quotes for self-employed individuals, it can be helpful to work with a service that connects you with multiple insurance brokers. This way, you can get a variety of quotes from different providers and compare them side by side to find the best policy for your needs and budget.

At Life Cover Quotes, we understand the unique needs of self-employed individuals and work with a network of insurance brokers to provide you with multiple quotes from top providers. Our service is free and easy to use, and we take the time to understand your specific needs and circumstances to help you find the right policy for you.

When you request a quote through us, we will connect you with one of our trusted insurance brokers who will provide you with multiple quotes from top providers. This allows you to compare the coverage and costs of different policies and make an informed decision about which policy is the best fit for you.

FAQs on Life Insurance for Self-Employed Individuals

No, life insurance for self-employed individuals works the same way as it does for anyone else. The difference lies in the reasons for buying a policy, as self-employed professionals might have different financial needs and concerns.

There are two main types of life insurance available for self-employed professionals: term life insurance, which provides a payout if you die within the policy term, and whole life insurance, which provides a payout whenever you pass away.

Premiums for personal life insurance are not tax-deductible for self-employed individuals. However, any payout from a life insurance policy is not subject to Income Tax.

Life insurance premiums are typically not considered an allowable business expense, as they are seen as a personal benefit rather than a business expense.

Self-employed individuals can protect their income through income protection insurance, which provides regular payments of a proportion of your average income if you’re unable to work due to illness or injury.

Self-employed professionals may also consider professional indemnity insurance, employers’ liability insurance, public liability insurance, and product liability insurance, among others, depending on their specific needs and industry.

To obtain life insurance quotes, self-employed individuals can use our “Life Cover Quotes” website, which connects you with FCA non-advisory brokers who can provide you with personalised quotes.

Yes, self-employed individuals can write their life insurance policies in trust, which can help ensure the payout goes directly to the beneficiaries and avoid potential inheritance tax issues.

To determine the right amount of life insurance coverage, consider factors such as outstanding debts, future expenses, and the financial needs of your dependents. You may also use a life insurance calculator to estimate the amount of coverage needed.

For those in high-risk occupations, insurers may ask additional questions about the nature of your job and potential risks. This could result in higher premiums or specific exclusions within the policy. It’s essential to disclose accurate information to ensure your policy remains valid.