Many people want the freedom and flexibility that self-employment brings. However, self-employment also means giving up the many safety nets of a traditional job. If you are self-employed and the sole income earner, you need to safeguard your family’s well-being if you pass away.
Life insurance is one way to take care of your loved ones when tragedy strikes. Keep reading for the Medical Profiles, Inc. guide to life insurance for the self-employed in Houston, TX.
Do Self-Employed People Need Life Insurance?
Many self-employed people focus on health insurance plans with adequate medical coverage and medical care. As a result, they may neglect life insurance.
Most Americans rely on their employers for health coverage, including life insurance policies. Self-employed people have to look elsewhere. They should also consider getting a life insurance policy for these reasons:
- Life insurance is the primary way to replace your income if you die. If you support a family with your freelance income, you need a backup plan for that money.
- Beneficiaries can also use death benefits to pay off any outstanding debt from a business or personal loan. Some life insurance policies also allow you to take out loans against the value to fund business ventures.
- Payouts for life insurance can clear other outstanding debts, like credit card debt, mortgages, car loans, etc.
Term vs. Whole Life Insurance for Self-Employed People
There are two main types of life insurance for the self-employed in Houston, TX: term and whole (or permanent) life insurance. Both types have advantages and disadvantages.
Term life insurance has low premiums and pays a predetermined benefit upon death. Term policies have specific timeframes that determine how long the policy is active.
For example, a 15-year term policy is valid for 15 years, after which the policy is null. Term policies are a good choice because they have relatively predictable premiums and straightforward benefit conditions.
Whole-life policies don’t have term limits and are active as long as you pay the premium. Whole-life policies also have a cash value portion that accrues value the longer you hold the policy. The policyholder can take out loans against their policy’s cash value tax-free.
Which Policy Is Better for Self-Employed People?
The best policy depends on your specific needs and income. Term life policies are generally cheaper and have more consistent premiums, making them a decent choice if your income changes frequently. The downside of term-life plans is that they don’t offer any other kind of tax benefits or wealth-building potential.
Whole-life policies last your entire life and have useful wealth-building strategies built in. You can take out tax-free loans against the policy’s cash value or surrender the policy to receive the funds. The main disadvantage is that whole-life policies have significantly higher premiums.
You’ll need to carefully consider your needs and income and talk to an agent from a licensed insurance company. A financial professional can also walk you through your options.
Can I Deduct Life Insurance from My Taxes If I Am Self-Employed?
Generally speaking, you cannot deduct life insurance premiums or a disability insurance policy from your taxes if you are self-employed. If you are an LLC, S-corp, or sole proprietor and provide life insurance benefits, you can deduct those expenses. In almost all cases, death benefits from life insurance are tax-free.
Schedule a Paramedic Exam Today!
If you are looking for life insurance for the self-employed in Houston, TX, you will most likely need a medical exam. Contact Medical Profiles, Inc. at (832) 251-3926 to schedule an appointment!
