The workforce has been changing faces since the COVID19 pandemic. As people were either laid off or sent to remote work and then faced the idea of returning to a formal work environment, there came about a challenge to the norm.
An estimated 8.2 million people chose the self-employment route in the wake of the pandemic. If that’s you, or you run a small business, you may wonder what happens with insurance benefits now that you work for yourself.
The answer is that you have options. There are several different types of life insurance available for small business owners or people who are self-employed. We’ll look at the various ways you can obtain life insurance and how to determine how much you need.
Types of Life Insurance Available
Being the owner of a small business, or being self-employed, means that people count on you. Your ability to provide financially is an asset to those around you, and it needs to be insured. Just because you’ve left the formal work environment doesn’t mean you should forgo life insurance.
When it comes to ensuring your financial future as a self-employed individual or a small business owner, three main types of life insurance are typically chosen with popularity:
- Personal Life Insurance: Personal life insurance is tailored specifically to your financial profile. It is taken out and paid by one individual rather than a group of people and names a specific beneficiary in the event of death.
- Key Man Life Insurance: This type of policy is designated to protect a business if a high-level executive should be incapacitated or pass away. For a smaller business, this would be the owner of the company. The policy ensures that the business operations can continue to function without the key man.
- Buy-Sell Agreement: In a small business setting that is started by more than one individual, a buy-sell agreement is a policy that is taken out to protect each owner if the other owner dies.
Purchasing the Right Amount of Insurance
Identifying which type of policy fits your current profile is only half the strategy. A general recommendation is to take out a policy covering 10-15 times your annual income. You also need to consider how much your death or inability to work would cost your loved ones or business.
To get an accurate estimate of how much insurance you’ll need, you need to look at your financial facts. Weighing your income versus your responsibilities will help you know the policy size to buy. Consider the following when making a calculation:
- Number of Employees
- Assets or Resources
- Overhead Costs
- Other Owned Insurance Policies
Final Thoughts on Life Insurance for Small Businesses or Self-Employment
If you’ve chosen to enter into self-employment or run a small business, you’re not alone. The world is quickly moving towards a new work structure. Once you make the leap, ensure that your loved ones are covered if something happens to your income source. Choose the right type of policy and calculate how much insurance you’ll need to make a sound financial investment in your business’s future. Contact PHP Agency today to learn more about your life insurance options.