Entrepreneurs have several lifestyle advantages, such as being independent and setting their own schedules. However, there are also certain trade-offs, such as you having to provide your own benefits instead of receiving them from an employer. If you have employees, you need to consider providing life insurance benefits to them. Here are important points for self-employed individuals to know about life insurance.
Do You Need Life Insurance?
An essential question for self-employed individuals is whether they need life insurance. If you are raising a family, it’s a good idea to get life insurance to provide financial protection for your loved ones. Single people who don’t plan on raising a family can still use a whole life plan as an investment strategy since it grows in cash value.
The other main type of plan is a term life plan, which provides benefits for a set term instead of a lifetime. Many single individuals prefer a term life plan because it costs less, although it provides fewer benefits. Both whole life and term life plans provide a death benefit, in which the plan pays for funeral expenses and other terminal costs.
Another reason to get a life insurance plan is to avoid the hassles that occur if no will is in place for an estate owner. It also provides tax-free benefits to beneficiaries. Other reasons for getting a life insurance policy include paying off personal and mortgage debt and paying for your children’s education. The “DIME” method of calculating life insurance coverage encompasses debt, income, mortgage, and education.
Deciding on Type of Life Insurance
The two most common types of life insurance policies, as mentioned, are whole life and term plans, but another option is a universal life plan. A universal plan pays death benefits to survivors and provides growing cash value for the policyholder, similar to a whole life plan, but it offers more flexibility with payments. You can use the cash value to withdraw or borrow against. The main advantage of a term life plan is that it’s the most affordable.
Life Insurance for Business Owners and Employees
If you run a business, life insurance can pay off business debt. Although premiums are not tax-deductible for self-employed individuals, you can deduct the life insurance costs you pay for employees. In order to do so, your business needs to file as an LLC or S Corp, as sole proprietorships do not qualify for this deduction. You’ll also need to set up a group life insurance policy for your employees.
Plan the Future of Your Loved Ones
Life insurance serves as a form of financial security for loved ones and business survivors. Contact our team at Lou Aggetta Insurance Inc. for more information about what life insurance can do for you and others you care about. We will also help create a customized life insurance plan if you don’t have it already.