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How to get life insurance as a freelancer
Term life insurance with an option to convert to a permanent policy may be your best choice.
One of the major perks of freelancing is having options. Options for where to work, when to work and what to work on. When it comes to buying life insurance, you’ll have options too. As a freelancer, you’ll be able to buy whatever type and amount of life insurance that you can afford.
What's in this guide?
- Can I get life insurance as a freelancer?
- Compare life insurance companies for freelancers
- How to buy life insurance as a freelancer
- What's the best life insurance for freelancers?
- How much life insurance does a freelancer need?
- How does freelancing affect life insurance?
- Reasons to consider life insurance as a freelancer
- Bottom line
- Frequently asked questions about life insurance for freelancers
Can I get life insurance as a freelancer?
Yes, you can buy life insurance as a freelancer. Your freelancing career doesn’t affect your eligibility for coverage. Rather, it will be based on your overall health condition and whether or not you have any preexisting conditions, if you’re a heavy tobacco user, have a family history of health problems, or engage in dangerous or high-risk work or hobbies.
Compare life insurance companies for freelancers
How to buy life insurance as a freelancer
There’s no shortage of life insurance companies from which to buy a policy, especially since freelancing isn’t a hazardous profession. Get a quote through traditional life insurers, independent insurance agents or online life insurance companies.
Many life insurers require you to complete a medical exam if you buy a policy with a death benefit over a specific amount, such as $100,000. Other insurers, particularly online ones, have a much higher threshold before requiring a medical exam and some insurers don’t require one at all. Although, policies that don’t require a medical exam tend to cost more.
If you can, opt for a policy that includes the ability to convert to a permanent, whole life policy at any time during the term. And if you have children or plan to in the future, you can add a child rider to your policy that converts into the child’s own life insurance policy once they reach adulthood.
Compare life insurance ratesCompare quotes for life insurance policies starting at $15/month.
What’s the best life insurance for freelancers?
Your financial situation will determine the best life insurance option for you, but the two most commonly bought types of life insurance are term and permanent.
- Term life insurance. A term life policy is pure life insurance: you pay a premium and your loved ones will receive a benefit amount if you pass away during your policy term. Term life is more affordable than permanent life, and is typically offered in increments between 10 and 30 years. If you outlive your policy term, you lose your life insurance coverage.
- Permanent life insurance. This type of life insurance stays in force for your entire life, as long as you pay the premiums. It also has a cash value component that builds over time. Your cash value can be used for nearly anything, such as a retirement supplement or as a down payment on a retirement home, but using it reduces your death benefit. There are different types of permanent life insurance policies, but the simplest and lowest upkeep policy is whole life insurance.
- Term life insurance with conversion. Some insurers allow you to buy a term policy that has a whole life conversion option. This may be automatically included, or you may have to add it as a rider. The conversion option allows you to convert your term policy into a whole life policy during a specified time period, without having to take a medical exam.
How much life insurance does a freelancer need?
The standard rule of thumb to buy life insurance coverage of 5x to 10x your annual income may not apply to freelancers who have a varying income. There are a few general strategies that you can use as a starting point to determine how much coverage you need.
- If you’re an established freelancer with steady income, you could simply take your last tax return as a base number, and then multiply that by at least 5x for a starting number.
- If you’re new at freelancing or have a highly variable income, you can take your highest earning month or year as your starting point and multiply that number by 5x.
- If you’re somewhere in between those two options, you could take the average of your last three years’ tax returns as a solid starting number.
Once you have a starting number, you can get some life insurance quotes and see if you can afford that much coverage. You can always adjust your benefit amount to fit your budget, because some life insurance coverage is better than none at all.
How does freelancing affect life insurance?
The main impact that freelancing has on life insurance is the uncertain income that you may experience with freelancing. If you have an income that varies considerably but you want life insurance, consider buying a term life insurance policy.
Since a term life insurance policy is generally more affordable than permanent life insurance, you’ll have a better chance of budgeting for it during months where your income is lower than usual.
You can still buy a new policy in a few years if your income becomes more predictable. And if you stay in good health, your rates likely won’t be much more expensive than they are now, even though you’ll be a little older.
Reasons to consider life insurance as a freelancer
Freelancers benefit from life insurance similarly to people with traditional jobs. Unless you’re independently wealthy with no dependents or financially independent children, life insurance can likely put you at an advantage.
Having a family and dependents
If you have a spouse and children, replacing your lost income with life insurance could help your family maintain their current standard of living and pay for future expenses. Even if your spouse works, consider if your family would have a difficult time getting by without your income.
Pay off debt
If you have debt, such as a mortgage or student loans, it won’t simply go away if you die. Your debt will likely be transferred to your closest kin through your estate, which means your debts will become their debts. Buying enough life insurance to fully eliminate your debt could be a huge financial relief for your loved ones.
A major factor in life insurance rates is age, with younger people paying lower rates than older people. If you’re a younger freelancer, it may make sense to buy life insurance now while you’re young, even if you don’t have debt or dependents.
If you think you may have a family in the future or buy a house, buying life insurance early while the rates are lower can protect your assets later at a cheaper cost.
Freelancers can buy life insurance like any other employee, making sure that the policy you buy fits your fluctuating budget. A term life insurance policy with an option to convert to a permanent policy may be an ideal choice as a freelancer, as it gives you coverage now but with the option to have permanent coverage with cash value later on.
Before settling on a life insurance policy, compare life insurers to find the best option for you.
Frequently asked questions about life insurance for freelancers
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