A self-employed worker is responsible for every aspect of their finances, from paying any taxes to buying insurance policies. Life insurance is essential to protecting the financial future of those you leave behind, but if you're self-employed, the process of choosing a policy is as unique as your circumstances. Here are a few tips to follow to help you find the right plan for your needs. 

A Freelancer's Guide to Life Insurance

1. Consider Budget

Working freelance or as a contractor doesn't come with guaranteed income, making budget a top priority. Such considerations can impact your policy needs. Term policies are set for a specific period of time, while whole life plans last until death. As a result, term policies are usually less expensive, making them an excellent option if you're on a tight budget. Alternatively, if you feel financially comfortable with a continuous stream of income, whole life offers the peace of mind of a guaranteed payout. 

2. Factor Minimum Coverage 

When choosing a policy, it's important to select enough coverage to prevent leaving your debt obligations to those left behind. To determine the minimum amount, add up your assets, including savings, checking, and liquid investments. Then, calculate your total debt, including mortgage, auto loans, and student loans. 

Subtracting the assets from the debt gives you the lowest amount of coverage. Doing so prevents your spouse or kids from having to find a way to cover these costs or risking property they rely on being liquidated to pay it, like the primary dwelling. 

3. Estimate Income

If your loved ones are dependent on your income for survival, simply paying off debts may not be enough. Instead, you can opt for a larger policy that allows them to maintain their lifestyle for years to come. Typically, determining that amount involves calculating annual income by a set number of years, such as until your child turns 18. However, self-employed individuals often face fluctuations. 

As such, you can estimate a total instead. Either utilize your total income from previous years or take your highest earning month this year and multiply by 12. Take either number and multiply by the number of years you want to cover—usually one to 20—and add it to the minimum coverage total to find the ideal policy amount for your situation.

If you're a freelance worker, reach out to Hummel & Plum Insurance Agency in Chillicothe, OH, for personalized guidance finding a life insurance plan. The local insurance agency provides dependable assistance to residents across Ross County. From home and auto to business and life insurance, request a quote today online or by calling (740) 773-1620.