Life insurance for the self-employed
[social_share]As an employee of a firm or company, insurance products are usually offered at a discount compared to what the employee would be forced to pay on their own. This is true of other matters of finance as well, such as credit cards, unsecured loans, and home loans. But in contrast to those lines of credit, it is life insurance that can be a bigger burden on the budget of someone who is self-employed.
As a self-employed business person, policy holders will not be able to choose the annual insurance policies customary to employer-sponsored insurance. The cost-effective nature of this type of life insurance has many roots: a single-year term, standardisation, volume, and the tendency of providers to waive the costs of medical examinations that are otherwise required. Unfortunately for the self-employed, most of these benefits are not offered to them, thereby significantly increasing their costs.
When it comes to credit, credit ratings for self-employed workers also tend to be lower. This can result in a faster accumulation of debt that could threaten their ability to make consistent payments on their life insurance policies. Loan providers will often compensate for this by raising premiums on self-employed workers.
An additional determining factor when it comes to life insurance premiums for the self-employed is the buyer’s chosen profession. Depending on the profession, life expectancy can be lower than average, a factor that will very likely further increase the cost of life insurance. This is due to the fact that many self-employed people choose riskier careers. Whereas two people in the same profession will have the same life expectancy, it will be the self-employed person who pays more for their life insurance because they cannot benefit from the advantages of an employer’s policy.
Loan providers also tend to view self-employed workers as higher risk, not only for the careers in which they are working, but also because they stand a greater chance of terminating their policies early. This can often stem from the worker deciding to work again for an employer or experiencing a prolonged budget crunch that no longer warrants the payments they’re making for their current coverage. The administrative costs of an aborted policy can add up quickly for a provider, and in order to offset this risk they will often charge more.
