Life Insurance for the Self-Employed

Woman drinking coffee, working at home, and researching insurance for the self-employed

Key Takeaways

  • Self-employed individuals can shop around and compare rates for health insurance on the individual Health Insurance Marketplace, and may qualify for tax credits and cost-sharing reductions.
  • Life insurance options for self-employed individuals include term life insurance, whole life insurance, and universal life insurance, each with their own benefits and considerations.
  • Critical illness insurance can provide coverage for serious, life-threatening illnesses, complementing health insurance for self-employed individuals.
  • Self-employed individuals should research and understand their insurance options to determine the best policies to fit their financial needs.
  • Cash value accumulation, withdrawals, and loans from life insurance policies have specific conditions and potential consequences that need to be considered.

Self-employment is becoming increasingly common. Being your own boss often comes with several perks — a flexible work schedule, the ability to work from anywhere and no cap on your earning potential. But for all the benefits, there are also a few caveats to manage that traditional employees may not encounter, such as paying self-employment taxes and purchasing your own insurance.

U.S. Freelancers

In a recent study, 36% of US workers have done freelance work in the past 12 months and will continue to grow in the upcoming years.1

And if you have your own business, it's not only health insurance you should be concerned about. Other insurance policies to consider include life insurance and critical illness insurance. If you're wondering where to start when it comes to insurance for the self-employed, here are a few policies to consider.

Health Insurance

Health insurance can get expensive when you have to self-insure yourself, so you may want to try to shop around and compare rates.

One place to start your search is the individual Health Insurance Marketplace.2 You can enroll in a Marketplace plan if you're self-employed and don't have any employees, but certain small businesses may also qualify for coverage.

Depending on your income, you may qualify for tax credits and cost-sharing reductions that reduce your out-of-pocket health care costs. Plus, as someone who's self-employed, you may be eligible to deduct your health insurance premiums for long-term care coverage.3

Life Insurance

Life insurance is another option to consider if your family would experience a financial hardship if something were to happen to you and they lost your income. There are three major types of life insurance to consider.

  • Term life insurance provides coverage for a specified period that can be as short as five years or as long as 30 years. In many cases, you can renew the policy when it expires.
  • Whole life insurance covers you for your entire life as long as premiums are paid. Although the primary benefit is the death benefit, whole life insurance can also build cash value that you could borrow against or withdraw.4 Doing so, however, could reduce the death benefit or cause the policy to lapse.
  • Universal life insurance also covers you for your whole life as long as premiums are paid, but generally with more payment flexibility. When you first open the policy, your payments build up cash value. You then may have the flexibility to change how much you want to pay each year, and potentially use its cash value to help pay premiums as you age. Similar conditions to borrowing cash value from a whole life policy may apply. However, there may also be applicable surrender charges.

Critical Illness Insurance

In life, sometimes things happen when you least expect them. But that doesn't mean you can't try to be as prepared as possible. Critical illness insurance is one way you can prepare. This type of insurance helps provide coverage for some types of serious, life-threatening illnesses. The illnesses covered are defined by, and subject to the terms of, your policy.

Critical illness insurance does not replace the need for health insurance but may be a complement to health insurance if you're self-employed.

The policy pays you a cash benefit to help protect your quality of life with the freedom to use the money however you choose. You can use the money to help pay off debts, supplement lost income, arrange for child care while recovering, take a trip or simply maintain your quality of life.

The Bottom Line

Self-employment may come with many advantages, but stepping outside the bounds of traditional employment means you'll likely have to sort out a number of financial details for yourself, including health insurance, life insurance and other insurance policies.

Though paying for these costs out-of-pocket might seem negotiable, it's important to try to prepare for the unexpected. If you freelance or work for yourself, consider doing your research so you understand all your options and can then determine the best policy types to fit your financial needs.

Live More & Worry Less

Live More & Worry Less

We have financial professionals ready to assist you on your life insurance journey.
By submitting your information, you agree that Western & Southern Life may contact you at the number provided, possibly using automated technology or a prerecorded voice, to market products and services. You understand submitting your information is not required to make a purchase. Data rates may apply. You may revoke this consent by contacting 877-367-9734. You have read, and agree to, the Privacy Policy.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
Footnotes & Sources
  1. Gig Economy Statistics: 2021-2022 Market Growth, Demographics & Trends.
  2. Health coverage if you're self-employed.
  3. Deducting Health Insurance Premiums If You're Self-Employed.
  4. The policy would need to be funded properly to access the cash value. Keep in mind cash value may take years to accumulate, unless a large premium is paid up front. Withdrawals may be subject to charges, withdrawals of taxable amounts are subject to ordinary income tax, and, if taken before age 59½, may be subject to a 10% IRS penalty) and loans (e.g., interest is charged on loans, they may generate an income tax liability, reduce the Account Value and the Death Benefit, and may cause the policy to lapse. Please determine whether a withdrawal or loan is best for your situation.

Related Life Insurance Articles


Information provided is general and educational in nature, and all products or services discussed may not be provided by Western & Southern Financial Group or its member companies (“the Company”). The information is not intended to be, and should not be construed as, legal or tax advice. The Company does not provide legal or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. The Company makes no warranties with regard to the information or results obtained by its use. The Company disclaims any liability arising out of your use of, or reliance on, the information. Consult an attorney or tax advisor regarding your specific legal or tax situation.