Guide
Life insurance for the self-employed explained
If you work for someone else, they may offer a ‘death in service’ benefit. That means their insurance company will make a payment to your family if you die while employed by them. But if you’re self-employed, you won’t automatically receive any cover. And that’s why life insurance for self-employed people is worth thinking about.
Can I get life insurance if I’m self-employed?
Yes, absolutely. Life insurance for self-employed professionals is the same as life insurance for anyone else.
Certain self-employed jobs do come with a risk of death or injury. So, life insurance gives you and your family peace of mind.
How does life insurance for self-employed people work?
- You need to choose the kind of cover you want. There are two main kinds of life insurance. Term life insurance means you’re insured for a set number of years. If you die in that time, your family receive a payout. Whole life insurance lasts until you die so your family receives a payout whenever you pass away.
- You choose the required level of insurance. If you want your loved ones to receive a bigger payout, your premiums will be higher. The insurer will also want to learn more about your job and the possible risks. More hazardous jobs will usually have higher premiums (‘premiums’ is the word for the money you pay the insurance company). Once you’ve settled on a quote, you may be asked to have a medical examination.
- You simply pay your monthly, quarterly or annual premiums. Premiums are the money you pay the insurance company for your policy. If you die, your loved ones make a claim.
Do I need self-employed life insurance?
It’s a question of risk. How you weigh the risks up depends on your circumstances.
Some self-employed people face a relatively low risk of death. A graphic designer who works from their home office is unlikely to die at work. But a roofer, for instance, faces a higher safety risk on the job.
There’s also a question of your circumstances. A young person with no dependents and no mortgage might feel it’s unnecessary. But if you have a family and are the sole breadwinner, your loved ones would struggle financially if you died. Life insurance gives peace of mind, especially during hard times.
Learn more: Benefits of life insurance
What types of insurance should I consider?
There are a few different kinds of insurance that are relevant to self-employed people. Sometimes there’s crossover between them. You can also get packages with a few different kinds of insurance bundled together.
First are the different kinds of self-employed life insurance. You can get whole life insurance or term life.
There are also illness-related insurances for the self-employed. Critical illness cover pays you a monthly income while you’re recovering. It also helps pay for private medical bills. You could also choose income protection insurance. That provides you with monthly payments if you’re off work because of injury or illness.
Self-employed people should also think about liability insurance as it’s a legal requirement in some trades. If someone decides to take you to court, liability insurance will pay your legal fees.
Will my household insurance cover me?
No, contents and building insurance does not include life insurance cover. Whether you work from home or elsewhere, you will need separate life insurance. Home insurance covers things like damage to the property or theft. You make a claim and receive money to pay for replacement/repair. With life insurance, your loved ones receive a payout if you die.
Many self-employed people work from home. That means you might have valuable equipment in the house, so it makes sense to get extra insurance to protect it. If the equipment belongs to your business, you should tell the insurance company about this. It might be necessary to get separate insurance for work items.
Is life insurance tax-deductible for the self-employed?
His Majesty's Revenue and Customs (HMRC) sees life insurance as a personal cost. So, if you are buying life insurance for yourself (so your family receives a payout if you died), this isn’t a business expense. Tax-deductible business expenses are things like travel, equipment, or electricity bills. They are for the money you spend to do business. Life insurance isn’t strictly necessary to do business. So, it’s not tax-deductible.
There are a couple of circumstances where it could be tax-deductible. One example is a ‘key person’ policy. If you are an irreplaceable person at a company, the business would lose money if you died. Key person insurance mean your business partners could claim money for lost earnings. This kind of policy is tax-deductible.
Vitality life insurance
We provide life insurance for every stage of your life. Here are some of the benefits of taking out life insurance with Vitality:
- A brand you can trust - In 2023, we paid out 99.7% of life insurance claims.*
- Get a lower monthly premium upfront when you add Optimiser to your plan. Keep your premiums low when you stay active.
- Access to Vitality partner discounts and rewards.
- Get free no-obligation advice. Our advisers offer expert advice to help you make the right decisions.
Last updated: 20 September 2024
*Vitality Claims and Benefits Report, 2024
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