Author:Jonathan Harvey

Read:8 mins

As a self-employed professional, you relish the freedom to choose your own working hours, take holidays whenever you wish, and efficiently manage business expenses. However, the self-employed often lack access to crucial financial protections granted to those working under a traditional employer, such as Statutory Sick Pay or death-in-service benefits. To secure your family’s financial future, it’s vital to invest in self-employed life insurance. Comprehensive coverage in the form of UK life insurance plans can provide you with substantial peace of mind and financial stability regardless of your employment status. Keep in mind, though, that life insurance premiums aren’t tax deductible for the self-employed, but the payout is exempt from Income Tax.

Key Takeaways

  • Self-employed individuals lack access to financial protections provided by traditional employers
  • Comprehensive life insurance coverage is essential for ensuring your family’s financial stability
  • Different policy types, like term life insurance and decreasing term life insurance, cater to varying needs
  • Consider factors such as health, occupation, and mortgage obligations when selecting a policy
  • Life insurance calculator tools and financial advisors can help you make an informed decision on coverage

Understanding the Importance of Life Insurance for Self-Employed Individuals

Life insurance holds a special significance for those who are self-employed. As a self-employed individual, you are responsible for not only maintaining your income but also ensuring financial security for your loved ones in the event of your untimely demise. Being self-employed means that you do not enjoy the same employer benefits, such as death-in-service payouts or Statutory Sick Pay, as those with traditional jobs. Consequently, life insurance becomes vital for securing a stable financial future for your family.

Lack of employer benefitsEffect on self-employed individuals
No death-in-service payoutSelf-employed must provide for dependents through personal insurance
No Statutory Sick PayFinancial security needed in case of illness or injury
No paid compassionate leaveLoss of income during unforeseen challenges
National Minimum Wage not applicableGreater financial pressure to cover living expenses

These unique challenges highlight the importance of life insurance for self-employed individuals. In the absence of employer-sponsored benefits, securing personal insurance policies becomes even more crucial. It not only grants you peace of mind but also safeguards your family’s future.

“Life insurance serves as a substitute for lost benefits such as death-in-service, catering to the unique needs of the self-employed by providing essential support to loved ones.”

When considering the importance of life insurance, it is crucial to take into account factors like lack of paid compassionate leave and the National Minimum Wage. Having sufficient personal insurance enables you to maintain the quality of life for your dependents, ensuring continued financial security.

  1. Financial protection for your family in the event of your death or terminal illness diagnosis
  2. Replacement for employer-sponsored benefits, such as death-in-service payouts
  3. Relieving your dependents of financial burden during difficult times
  4. Insurance catered to the unique needs of self-employed individuals

In conclusion, having a comprehensive life insurance policy is of utmost importance for self-employed individuals who need to ensure their family’s financial security. It caters to their specific circumstances and replaces the employer benefits that they lack. Ultimately, life insurance becomes a crucial aspect of self-employed insurance policies, providing a stable future for you and your loved ones.

Types of Life Insurance Policies Suited for the Self-Employed

When exploring policy options for self-employed individuals, it becomes evident that certain types of life insurance policies fit their needs better than others. This section delves into the intricacies of term life insurance, decreasing term insurance, and critical illness cover, shedding light on their significance within the self-employed community.

Term, Decreasing, and Critical Illness Coverage Explained

Term life insurance is a popular choice among the self-employed, as it offers a payout if the policyholder passes away within the defined term. This kind of insurance typically provides coverage for a set period which could range from 5 to 30 years. The policy will only pay out if death occurs within the specified term.

“Term life insurance offers a level of financial security for self-employed individuals who need coverage for a fixed period, making it a flexible and cost-effective choice.”

Decreasing term insurance, on the other hand, is designed to provide coverage that decreases over time, aligning with the repayment of a capital and interest mortgage. With this type of insurance, the payout gradually reduces as the outstanding mortgage balance decreases, diminishing the sum assured over the term of the policy.

Life Insurance TypeDescriptionBenefits for Self-Employed
Term Life InsuranceCoverage for a fixed term (e.g., 10 or 20 years), with a payout if the policyholder passes away during the termFlexible coverage period and cost-effective premiums
Decreasing Term InsuranceCoverage that reduces over time, matching the decreasing outstanding mortgage balanceCost-effective way to cover mortgage repayments

Another option to consider is a critical illness cover which is often added to a life insurance policy. This type of coverage offers financial assistance if the policyholder is diagnosed with a specific illness, covered by the policy, during the term. An important addition for those in high-risk occupations or with a family history of illnesses.

critical illness cover

Lastly, both term life insurance and decreasing term insurance can be structured as either joint or single policies. While a joint policy is usually more cost-effective, it only pays out once, typically upon the death of the first policyholder. Single policies, although slightly more expensive, provide separate payouts upon the death of each policyholder.

  1. Term Life Insurance
  2. Decreasing Term Insurance
  3. Critical Illness Cover
  4. Joint or Single Policies

In conclusion, it is essential for self-employed individuals to carefully consider their options when selecting life insurance policies. Thorough analysis of factors such as outstanding mortgages, potential health risks, and the preferred structure (joint or single) will play a significant role in ensuring that the chosen policy best suits their unique needs and circumstances.


Securing a life insurance policy is a fundamental aspect of achieving financial security for self-employed individuals. By providing your loved ones with essential life insurance benefits, you are taking responsible measures to protect their financial well-being and maintain their quality of life in the event of an unforeseen tragedy. This is particularly important for those with dependents and no access to employer-sponsored insurances, such as death-in-service coverage.

Ensuring Financial Security for Loved Ones

Selecting the right life insurance policy is crucial in guaranteeing sufficient protection for your family. To make informed decisions about your self-employed policy, take the time to compare term, decreasing, and critical illness options, considering factors such as your health status, occupational risks, and mortgage obligations. Additionally, evaluate the merits of joint and single policies, as premiums may vary based on age and health risks.

Steps to Take in Selecting the Right Policy

Utilise insurance comparison websites and financial advisory services to aid you in your life insurance selection process. Assess the necessity of additional covers like income protection or home insurance, which are especially significant for those with home offices or workshops. Making use of life insurance calculators can further ensure that you choose the right coverage to address your unique circumstances and the future needs of your loved ones, contributing to self-employed security and peace of mind.


Why is life insurance important for self-employed individuals?

Life insurance is critical for self-employed individuals as it provides financial protection for their families in the event of death or terminal illness diagnosis. Since self-employed workers often lack employer-provided benefits like death-in-service, life insurance serves as a crucial safety net, ensuring their loved ones’ financial security.

What types of life insurance policies are available for self-employed individuals?

Self-employed individuals can opt for term life insurance, which offers a payout if they pass away within a set term, or decreasing term life insurance, which reduces over time, typically in line with the repayment of a capital and interest mortgage. Consider critical illness cover as an add-on to provide financial aid in case of a specified illness diagnosis during the policy term.

Should I choose a joint or single life insurance policy?

Deciding between a joint or single life insurance policy depends on your specific needs and circumstances. A joint policy is often more cost-effective, but it will only pay out once, whereas single policies can provide payouts for both parties independently. Compare the benefits and costs to make an informed decision based on your unique situation.

Are life insurance premiums tax-deductible for self-employed persons?

No, life insurance premiums are not tax-deductible for self-employed individuals. However, the policy payout is not subject to Income Tax, ensuring your loved ones receive the full benefit in case of your death or terminal illness diagnosis during the policy term.

How do I select the right life insurance policy for my self-employed situation?

To choose the appropriate life insurance policy, consider factors like health status, occupational risks, and mortgage obligations. Take into account the differences among term, decreasing, and critical illness policies. Seek professional advice and utilise life insurance calculators to make an informed decision on the optimal coverage for your needs and situation.

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Jonathan Harvey is a distinguished expert with over twenty years' experience in the UK's life, health, and funeral insurance sectors. A Cambridge graduate and Fellow of the Chartered Insurance Institute, Jonathan has a proven track record in designing innovative insurance policies, and a strong reputation for making complex insurance matters comprehensible for the public. Known for his empathetic approach, he has helped thousands make informed decisions on their future security. Regularly contributing to leading publications and hosting educational workshops, Jonathan's commitment to client service and public education truly sets him apart in the insurance industry.

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