6 Insurance Policies Self-Employed Professionals Should Consider

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Being self-employed has its perks. You have a flexible schedule, control your own income potential and make decisions based on your own self-interests. But, when it comes to being insured, that’s where being self-employed can be a little tricky.

Working for an employer usually allows you to be a part of a group insurance plan that covers you and your family for a variety of insurance products. If you decide to take the self-employed route, you will usually be cut off from these group plans and need to seek individual coverage.

If you are currently self-employed, or thinking about going this route in the future, then strongly consider looking at these six insurance products.

Life Insurance

Life Insurance pays out to your beneficiaries in the event of your death. There are two primary types of life insurance policies: term life insurance and permanent life insurance. Term life insurance covers you for a certain amount of time while permanent life insurance guarantees lifetime coverage.

As a self-employed person, it’s important that you take out a life insurance policy in order to minimize the financial consequences of your death to your loved ones.

For example, if your self-operated business owes money to a creditor, that debt would be passed on to your beneficiary who inherits the business in the event of your death. Getting a payout from a life insurance policy would give your beneficiary the ability to clear out your debts. They can then either continue to operate or sell the business without any further hassles.

Disability Insurance

If you are self-employed and end up being unable to operate your business because of a disability, you would have no alternate means of earning enough income to provide for yourself and your family. This can quickly put you in debt as bills continue to rack up.

Keep in mind that you also still have to deal with operating expenses for your business, such as rent, even when you’re not actually working and earning anything.

Disability insurance provides you with a monthly income in case you are unable to work due to a serious illness or injury.

Many people are simply content to take out life insurance and forget about other insurance products. Just a reminder: the chances of you passing away are much, much lower than the chances of you being disabled.

So, for self-employed people, having a disability insurance plan in place is absolutely critical.

Critical Illness Insurance

Like its name implies, critical illness insurance pays out when you are diagnosed with a serious medical condition (eligible medical conditions for this insurance are agreed upon during the underwriting process). Unlike disability insurance, critical illness insurance usually offers a one-time lump-sum payout.

If you are self-employed and operate your own business, having critical illness insurance provides an opportunity to have a fallback plan that entitles you to receive a large sum of money in case of a serious medical problem.

This money could help bring you some flexibility while you decide how to deal with your serious illness and manage your business. For example, you could hire help to manage your business in your place while you focus on treatment.

Segregated Funds

Segregated funds are offered by many insurance companies as an alternative to mutual funds. While these two investment funds are similar, segregated funds have several advantages over mutual funds. Some of these include having a maturity guarantee of 75% of your principle investment, protection of assets from creditors and resetting privileges to lock in growth. Many insurance companies also allow you to put segregated funds into a RRSP or a TFSA.

Having that protection from creditors makes segregated funds an extremely important product for self-employed individuals who are looking to safeguard some money for retirement.

For example, let’s say that you undergo some rough times and have to declare bankruptcy. In this scenario, you stand to lose your assets to creditors. But, if you have a segregated fund set into a life insurance contract in your RRSP, it is fully protected from creditors.

So, by having a secured segregated fund set aside, you have a backup plan in case you don’t reach retirement with sufficient assets.

Personal Health Insurance

If you live in Ontario, your dental and vision treatments are not covered by OHIP. These treatments are generally covered by group insurance plans. But, if you’re self-employed, you won’t receive that coverage.

In this situation, the best insurance product to get is personal health insurance. This insurance protects you from unexpected health expenses not covered by provincial health insurance plans.

Many personal health insurance plans not only cover medical treatments, but also reimburse you a portion of the amount it costs to buy prescription drugs or supplemental health care products such as hearing aids.

Without having a personal health insurance plan in place, you could quickly find yourself in debt if you get afflicted with a medical condition that has expensive treatment costs and is not covered by a provincial health insurance plan.

Travel Insurance

There are generally two different types of travel insurance plans available: travel medical insurance and non-medical travel insurance.

Travel medical insurance covers you in the event that you require medical treatments for an injury or a sickness while abroad. This plan can include reimbursement for hospital stays, medication and even the cost of emergency repatriation. Here is a comprehensive list of items that you need to make sure your plan covers.

Non-medical travel insurance can provide coverage for lost luggage, cancelled flights, rental cars and much more depending on the plan.

If you’re self-employed, then it’s absolutely critical that you purchase at least travel medical insurance when leaving the country. Getting sick or injured while abroad could put you on the hook for thousands of dollars in treatment fees if you’re uninsured. This could set your business back for years.

If you conduct business internationally and are travelling with valuable cargo, purchasing non-medical travel insurance with baggage protection is highly recommended. This plan will protect you in the event that your cargo gets lost, damaged or stolen during the journey.

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Tim Landry
Tim Landry

Subset to the disability plan is Overhead Expense insurance. You do mention needing to pay the expenses of the business but they should be insured separately and if there is more than one owner in the business DI Buy Sell should be included.

LSM Insurance
LSM Insurance

Thanks Tim. That’s a good point.