Is life insurance more expensive for self-employed people?
[social_share]One of the downfalls of being self-employed is that many financial products prove to be more expensive than those for employees. A particular example of this is credit, from mortgages to unsecured loans to credit cards. Life insurance can also be more expensive for self-employed people, but for different reasons.
The first problem with life insurance for the self-employed is that there’s no access to the cheap annual insurance that often comes through an employer. This type of life insurance can be very cheap because it’s purchased on an annual basis, it’s standardised, it’s bought in bulk, and life insurance providers will often waive the need for a medical examination. Some professional associations also offer life insurance through an affinity deal, but this can be more expensive than policies acquired through an employer’s scheme.
Another potential issue is that life expectancy in some occupations is lower than it would be in other occupations. There are two aspects to this. Many trades that tend to be self-employed are more dangerous, and so a house painter who is employed has the same life expectancy as a house painter who is self-employed. Although this does raise the life insurance premiums quoted, the cause is actually the occupation rather than the employment status. The other issue is that self-employed people can suffer from stress more, and this can also cause life insurance premiums to be higher.
There is also an increased risk of cancellation through the whole life of the policy, as the self-employed worker may take a job and no longer need the insurance, and so the life insurance policy is more likely to end prematurely. As this is expensive administratively, some life insurance companies find it’s more expensive to service self-employed customers and this can be reflected in the prices they charge.
The final issue for self-employed people is that their credit ratings may be lower, due to the potential debt issues for the self-employed. This can be reflected in life insurance premiums, as well.
