Life insurance for self-employed

Working for yourself can come with financial challenges. That's why it's worth considering life insurance when you are self employed.

life insurance options

Being self-employed has a number of great benefits that make it attractive to many people: you can go on holiday when you want, you can control your budgets, you can work in a space that suits you and you can continue to develop a professional skill every day.

To go along with the freedom and control, there are a number of drawbacks. As well as generating your own work, you also have to ensure that you’ve paid your own taxes and kept on top of a vast amount of organisation. And you can miss out on some of the perks that employment can bring, such as death-in-service benefit.

Life insurance for self-employed people can bring a sense of stability to a career that isn’t always predictable. Because of the lack of employee benefits, life insurance for self-employed people is arguably more important than for those in full-time employment.

Should I get life insurance if I'm self-employed?

Working for an employer has a raft of benefits that are unavailable for the self-employed. One of these is ‘death-in-service' benefit, where employers pay a multiple of your salary (usually two to four times) to your dependents should you die while employed.

Many employers also provide things that would cost you if you were self-employed, such as health insurance, sick leave, maternity leave and so on.

Self-employment comes with the responsibility to provide all of these things for yourself. As you may also be providing for your family at the same time as working for yourself, the financial worries can be multiplied.

Life insurance for self-employed people can provide a safety net for those you love should you die. Unlike employment, where your family could expect some form of payout from your employer, self-employment relies on your ability to create savings to provide for your family.

How does life insurance for self-employed people work?

Life insurance policies work the same way whether you’re employed or self-employed, however your reasons for buying a policy might differ.

Term life insurance gives a payout if you die within the life (or ‘term’) of the policy. The length of this term will be pre-arranged by you when you take out the cover, as will the payout and your monthly premiums:

There are a number of different term life products available that have different uses.

Decreasing term life insurance

Decreasing term life insurance

If you are paying a mortgage, then decreasing term life cover could be the most helpful. This type of policy often has the lowest premiums of the three most common term-life options (for the same amount of cover) and is designed specifically to cover gradual-repayment debts. The rate at which the payout amount on a decreasing term insurance goes down is designed to be broadly the same as how the outstanding balance of a capital and interest repayment mortgage decreases.

Therefore, should you die during the term of this policy, your mortgage obligations should not fall to your partner or children. Most providers have a cap on mortgage interest rates, meaning that mortgages with interest rates over that cap may not be fully-covered by a payout.

Level & increasing term life insurance

level term life insuranceIncreasing term life insurance

Level term and Increasing term insurance policies offer set payouts which are decided when you take out your policy. The difference between the two is that with Increasing policies, the amount of the payout goes up each year (to help mitigate the effect of inflation). However, Increasing term policy premiums also increase annually, so this is something to factor in. Whereas they remain the same throughout your policy with Level and Decreasing cover.

Other kinds of insurance for self-employed people

Life insurance for self-employed people is an important protection for your family should anything happen to you. As well as the worst-case scenario of your death, there are other situations that might warrant life insurance or other types of insurance.

Critical Illness Cover

Critical illness cover is an add-on policy that you can only include at the time you take out your life insurance policy with the Post Office. While it is hopeful that it will never be needed, it does offer protection in the event that you fall ill with conditions outlined in the policy document.

In this unfortunate situation, the Critical Illness Cover will pay an additional sum, the equivalent of 25% of your life policy payout amount, to help you manage if you are unable to work. This is a particularly important type of life insurance for the self-employed, as there isn’t the same kind of sick pay that one might receive from an employer.

Home insurance

Many self-employed people have a home office, practice or workshop. Whether your actual work requires you to travel to other locations and you complete your bureaucratic work at home or you have a large-scale workshop attached to your house, the damage can be enormous if your home were to suffer damage.

It’s not the case that your home business will automatically be covered on your home insurance. Talk to a provider so that you can be sure you are getting appropriate cover.

Getting the right cover for your home and contents is a necessary precaution if you work from home or have a home-based business address. As well as offering your business protection, it also brings peace of mind for yourself and your family.

Our life insurance calculator is an easy way to estimate how much cover you may need in your current situation. Simply enter a few details into the calculator to start.

If you’re interested in life insurance, then consider a life cover policy from the Post Office.

Other ways to get covered

Post Office Life Insurance

Choose between level, decreasing or increasing term insurance, each designed to offer you peace of mind based on your circumstances.

Life Insurance

Post Office Over 50s Life Insurance

If you're aged between 50 and 80 Post Office could help you to leave your family the gift of a cash sum or help towards your funeral costs

Over 50s Life Insurance

Post Office New Parent Free Life Cover

If you have children aged under four years old, you could get £15,000 of life cover free for a year. That's £15,000 each for mum and dad.

Free Parent Life Cover

Critical Illness Cover

Get extra protection and financial peace of mind by adding the optional Critical Illness Cover to your Post Office Life Insurance.

Critical Illness Cover

Still have questions?

You can find more information on life insurance by visiting Post Office life insurance guides and articles.

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