Key Takeaways
- Term life insurance can help self-employed and freelancing Canadians provide their loved ones with financial protection.
- Self-employed individuals, including contract and gig workers, are usually eligible for quality, affordable term life insurance.
- Blue Cross Life offers flexible term life insurance policies that meet the evolving needs of freelancers and self-employed Canadians.
Why term life insurance matters for self-employed Canadians
Term life insurance is important for self-employed Canadians as it can provide your family and loved ones with a tax-free, lump-sum payout—also known as the death benefit—in the event you pass away.
Term life insurance can be used as a financial cushion to cover expenses, funeral costs, debts, and any other financial obligations as your loved ones navigate life without you. As a freelancer or self-employed business owner, you may also carry debts and expenses related to your business. The death benefit can also be used to cover these costs.
Self-employment can come with many perks. But many self-employed individuals don’t get traditional workplace benefits, such as health and dental or life insurance. While term life insurance is important for all Canadians, having a comprehensive term life insurance policy can be critical for those who are self-employed, freelance, or perform contract and gig work. It can provide their loved ones with financial security if the worst were to happen.
Key term life insurance considerations for freelancers
When purchasing a term life insurance policy, it’s important to consider a few key factors. The most common ones include:
- Term length: How long you expect to need coverage for—often ranging from 10-30 years.
- Coverage amount: How much coverage you need—often ranging from $100,000 to $5 million.
Term length is determined by the number of years you expect to have higher financial responsibilities. For example, the years you have financially dependent children or are building your business. Your coverage amount is determined by the number of financial obligations you have, such as business debts, mortgages, and the number of financial dependents. These considerations can impact your monthly premium or rate.
Even Canadians who have employer-provided group term life insurance often choose to purchase additional life insurance, to ensure they have enough coverage to protect their loved ones for the right length of time.
Term life insurance options for gig and contract workers
There’s a common misconception that contractors and gig workers aren’t eligible for affordable, high-quality term life insurance. The reality is that the options are very similar to those available with traditional employment. Term life insurance premiums depend more on things like your age, health, and occupational risk, not on whether you are self-employed or traditionally employed.
Term Life Insurance from Blue Cross Life is a great option that offers flexible and affordable policies for freelancers, contractors, and gig workers. Benefits of choosing Blue Cross Life Term Life Insurance include:
- Rates that never change throughout your term.
- An additional 10% savings on first-year premiums for couples.
- $10,000 in free life insurance for each of your dependent children.
- 30-day grace period for missed payments.
- Free cancellation at any time, no fees or penalties.
- 30-day money-back guarantee.
How much term life insurance do freelancers need?
The amount of term life insurance you might need as a freelancer is unique to your situation. Financial experts typically recommend somewhere between 7-10 times your annual salary. But for freelancers and contract workers, it’s especially important to consider factors outside of your income, which may vary from month to month or even year to year.
When determining the right amount of term life insurance for freelancers, you’ll want to consider:
- Income: The approximate amount you earn each year and the amount you expect to earn in the future.
- Debt: The amount needed to cover any outstanding debt, such as student loans, business loans, or mortgages.
- Financial dependents: The number of children, family members, or loved ones who count on you for financial support.
- Other financial responsibilities: Funeral expenses, education and tuition costs for your children, an inheritance, or other financial goals.
Getting approved without employer-provided benefits
Term life insurance eligibility isn’t tied to your employer-provider benefits. This means you can get approved for quality, affordable term life insurance as a freelancer or gig worker, even if you don’t have health insurance or other benefits.
While it’s common for workplaces to offer some type of life insurance as part of their benefits package, individual term life insurance is a separate policy and application process. Many workers who have significant financial responsibilities, like parents of young children, often purchase additional term life insurance even if they have existing coverage through their employer benefits.
Getting approved for term life insurance typically begins with getting a quote. This lets you compare options before completing your application. Blue Cross Life makes applying for life insurance quick and easy online, with many applicants getting coverage without needing a medical follow-up.
Term life insurance for freelancing FAQs
For the most part, variable income plays little to no role in the term life insurance application process. Your rates and approval status are more dependent on your health and lifestyle—as long as you’re providing honest and transparent health and financial information in your application.
Where variable income can impact the process of purchasing life insurance is calculating how much life insurance you need. When you’re self-employed or have a variable income, it can be trickier to determine how much life insurance you need as the recommended amounts are often a factor of your annual salary. It may also be more difficult to estimate your future earnings. Instead, if you have variable income, you can look at your financial responsibilities and goals to determine how much term life insurance coverage makes sense for your situation.
Generally, term life insurance isn’t more expensive for freelancers compared to any other type of employment. Term life insurance rates are determined by a few factors, including your age, health, and occupational risk, but self-employment doesn’t automatically lead to higher rates. Because this type of life insurance only offers coverage for a limited term, it’s usually a more affordable option compared to many other types of life insurance.
The myth that term life insurance is more expensive for freelancers often comes from the fact that many employees get some type of life insurance coverage as part of their employer benefits package. These rates can be more affordable as employers typically purchase these policies as a group. In some cases, the premiums may even be fully covered as part of the benefits package. That said, with employer-provided life insurance, you’re usually tied to the term lengths and coverage amounts in the group policy—and these amounts are usually limited to 1-2x your annual salary. Coverage also ends when you leave that employer.
Purchasing an individual term life insurance plan as a freelancer can be just as affordable, but will provide you with more coverage and flexibility. Your rate is guaranteed for the length of the term, and your policy stays with you, even if you change jobs in the future.
Yes! Your term life insurance coverage should always reflect your current needs, which means you should be reviewing and adjusting your policy as needed.
For example, if you were to end up working for an employer who offers life insurance as a benefit, you may reduce the amount of coverage in your individual plan. Or alternatively, if your business grows and your income and expenses change, you may consider applying for more coverage to take care of those additional financial obligations. Term life insurance providers like Blue Cross Life make it easy to adjust your coverage or cancel your plan without fees or penalties.
Keep in mind that term life insurance rates tend to rise as you age, so purchasing and maintaining a comprehensive policy early on can be more affordable in the long run.
Typically, the Canada Revenue Agency (CRA) does not consider term life insurance policy for self-employed individuals and contractors to be a business expense. Term life insurance is usually purchased to provide your loved ones with a financial cushion in the event of your death and is considered a personal expense.
In some cases, life insurance may be tied to your business—for example, if it’s purchased in relation to your business loan conditions or you purchase a group term life insurance policy for all your employees. In these scenarios, term life insurance premiums may be considered a business expense and is something you should discuss with an accounting professional.
Term life insurance benefits will be paid to anyone you choose as your beneficiary. Typically, family members, children, or elderly parents who are financially dependent are chosen to receive the payout.
In the event of your passing, your beneficiaries will be financially protected with a tax-free, lump-sum payment—also referred to as the death benefit. The money can be used to cover lost self-employment income, pay for extra expenses, settle debts, or take care of any other financial needs during a difficult time.
You can choose to never miss a payment by setting up pre-authorized payments via credit card to pay for your policy. Most major credit cards are accepted.
Term life insurance provides coverage only during the policy term. If you pass away after the term ends, no death benefit is paid out.
However, policies through providers like Blue Cross Life include renewal features that automatically extend your coverage past the initial policy term, ensuring continued financial protection as long as premiums are paid. This way, your beneficiaries remain protected even after the initial term expires, though premiums may increase with each renewal.
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