What freelancers need to know about life insurance

Focused young businesswoman hammers out a crucial deal at her laptop as a freelancer

When you start a traditional job, there’s often a scheduled meeting with human resources during which you go over the health insurance plan, the retirement plan and group life insurance. Freelancers, however, have to act as their own human resources department and figure out how to set up their health insurance and retirement plans on their own — and yes, their life insurance policy too.

Many freelancers don’t consider taking out a life insurance policy, either because they’re not aware it’s an option or because their partner has life insurance through a traditional employer. This can have serious financial consequences, especially for freelancers with debt (including business debt) or dependents.

If you’re a freelancer whose spouse has life insurance, there are a lot of good reasons to take out a life insurance policy of your own. If you’re a freelancer with children or aging parents, life insurance is practically essential. Even if you’re a single freelancer with no children, taking out life insurance could help ensure that nobody gets stuck paying off your student loans after you die.

So set up a meeting with your human resources department — that is to say, yourself — and figure out whether it’s time to sign up for life insurance.

Can freelancers get life insurance?

Freelancers often assume that certain types of insurance just aren’t available to them. After all, before the Affordable Care Act, there were a limited number of ways to access health insurance without a traditional employer. Even with the ACA in place, freelancers have fewer options to access additional types of insurance, such as short-term disability insurance, than do their traditionally employed peers.

However, it is very easy for a freelancer to sign up for a life insurance policy. Although employers often offer life insurance as an employee benefit, life insurance is not linked to traditional employment the way health insurance was before the ACA. Self-employed individuals have just as much access to life insurance as anyone else, and you can take out a life insurance policy whether your taxable income gets reported on W-2s or 1099s.

What types of life insurance are available?

Here are two popular types of life insurance: Term life insurance and whole life insurance, a form of permanent life insurance. We’ve got a complete overview of term vs. whole life insurance, but here’s the tl;dr: term life insurance covers the term in which the policy is active and whole life insurance covers you for your entire life.

In other words, you can take out a term life policy that covers a specific length of time — 10 years, 20 years, 30 years, etc. — and once the term is up, elect not to continue your policy. (Of course, if you don’t 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 policies to cover a specific length of time during which their death might cause exceptional financial harm to their families. For example, parents might take out term life insurance policies to cover their children’s dependent years.

Whole life policies, on the other hand, cover you for your entire life. These policies are usually more expensive than term life policies, but they include a cash accumulation component known as the policy’s cash value that can grow over time.

Whichever type of life insurance you choose, the end goal is the same: Protect the ones you love in a way that makes sense for you.

What is Haven Life?

Watch now

How much life insurance do freelancers need?

Freelancers, like anyone else, need different amounts of life insurance depending on their financial situation and their beneficiaries. A single person with no children, for example, might not need life insurance — unless, of course, they fall into one of these seven categories. (Do you have student loan debt or mortgage debt? Are you supporting aging parents? Click that link.)

In general, professionals recommend taking out a life insurance policy in the amount of five to 10 times your annual income. Since freelancers often have annual income that varies from year to year, feel free to average out your previous annual earnings, pick your highest-earning year or simply use last year’s income as your benchmark.

However, the “five to ten times your annual income” recommendation is just a starting point. You’ll also want to consider additional factors such as your debts, childcare or healthcare costs (for your surviving spouse and/or children) and even funeral expenses. Haven Life has an online life insurance calculator that can help you determine how much life insurance is best for you and your family.

Life insurance that's actually simple.

Estimate your rate

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 next, you know how difficult it can be to manage your cash flow and budget for upcoming expenses. When you set up a term life insurance policy through Haven Life, you’ll pay a monthly premium, just like you pay for health insurance. Here are a few ways you can make sure there’s enough in the bank to pay that premium every month, even with variable income:

Keep your life insurance affordable

We’ve got a couple of tips and tricks to bring that premium down, such as buying term life insurance when you’re young and healthy (you’ll keep the same premium for the entire term, even as you become… less young).

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

We know it’s tempting to spend every dollar you earn during one of those big-paycheck months, but there’s bound to be a small-paycheck month sometime in the future — so save up for it!

Use a budgeting app to manage your current and upcoming expenses

Because you have variable income, you want a budgeting app that allows you to plan for both regular expenses (such as your monthly bills) and irregular expenses (such as a new laptop) and budget these expenses as you earn income.

Don’t think of life insurance as something you’ll take care of later, when you can afford it. Freelancers need life insurance as much as anyone else, so ask yourself whether it’s time to take out a life insurance policy and make sure your loved ones can benefit from the work you’re putting into your freelance career even after you’re gone.

It’s not just easier life insurance, it’s an easier life.

Learn about the perks that come with being a Haven Term policyholder.

Explore Haven Life Plus

Nicole Dieker is a full-time freelance writer. Her work regularly appears on Bankrate, Lifehacker, The Write Life, and numerous other sites. She is the author of Frugal and the Beast: And Other Financial Fairy Tales. This article is sponsored by Haven Life Insurance Agency. Opinions are her own.

Haven Life Insurance Agency offers this as educational only, and the information provided is not written or intended as specific legal advice. Haven Life Insurance Agency does not provide legal advice. Individuals are encouraged to seek advice from their own legal counsel.

Real Rate is based on your application and third party data obtained during underwriting.

Haven Term is a Term Life Insurance Policy (DTC 042017 [OK1] and ICC17DTC in certain states, including NC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively through Haven Life Insurance Agency, LLC. Policy and rider form numbers and features may vary by state and may not be available in all states. In NY, Haven Term is DTC-NY 1017. In CA, Haven Term is DTC-CA 042017. Our Agency license number in California is OK71922 and in Arkansas, 100139527.

Get the latest news

Apply now