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In This Article, I’m Going To Provide Tips And Tricks On How To Qualify For Quality Life Insurance, Whether You’re Self Employed Or An Entrepreneur
NOTE: Would you prefer me to present this information to you in video format? Watch the video below for the complete presentation. Enjoy!
Most likely you’re reading this article because you own a small business, either by yourself or with partners.
And obviously being in business for yourself means that you have to source your own insurance products, whether that’s health insurance, disability insurance, or in this case, life insurance.
Because unlike those who have employers, you do not have the ability to participate in group life insurance plans. If this describes your circumstance and you’re looking for ways to buy quality life insurance, then this article is perfect for you.
There are eight specific reasons why self employed individuals buy life insurance:
- Lack of employer based coverage
- Loan collateral
- Protect your family
- Mortgage payoff
- Loss of key player
- Retirement protection
- Retirement funding
- Buy, sell agreement
We are going to discuss all of these reasons and talk about the different kinds of life insurance products available. Then we’ll tell you what the best course of action might be to find a life insurance plan and whether or not you should opt to get an exam and why.
The Topics We’ll Discuss Are As Follows:
- Who should I work with to buy life insurance if I’m self employed?
- Reasons why self employed people buy life insurance
- Types of life insurance available for those who are self employed or entrepreneurs
- Should I get an exam?
Who should I work with to buy life insurance if I’m self employed?
As a business owner, you understand that in capitalism, the goal is to provide a high quality product for a competitive price. Those who don’t do that end up going out of business and shutting their doors forever. So it’s important, as you already understand as an entrepreneur, to offer a service or product that has a unique selling proposition that gives an advantage to the clients that they can’t find elsewhere. This is why I believe in the brokerage model and helping entrepreneurs and the self employed with their life insurance needs.
A broker has a competitive advantage in helping their clients versus more traditional life insurance agents like those that work at State Farm or MetLife that only operate with their own life insurance products. You see, brokers have access to a multitude of different life insurance companies.
Each life insurance company underwrites differently. They look at different risks, on different levels of acceptability. And for some people, one company may offer a better package deal than another one. The problem with working with State Farm or MetLife, or what we call a captive agent, is that you have no options. The only option is what they have to give you with that one company.
Whereas a broker like Buy Life Insurance for Burial has access to dozens of life insurance companies and can simply shop around to see who’s going to give you the best price and coverage. So in turn, what we’re able to offer an entrepreneur or a self employed person is an competitive advantage to get them quality life insurance.
Reasons why self employed people buy life insurance
Let’s talk about the particular reasons why it’s a good idea to invest in a life insurance program to protect yourself, your business, and your family.
Lack of employer based coverage
Not having employer coverage is one of the biggest reasons why the self employed purchase life insurance. You may be a small business owner with no employees where you operate as a solo consultant. This means too that you are the sole person responsible for keeping the business alive.
You need to have life insurance because you don’t have an employer based program to offer life insurance at a competitive price. This is the biggest reason why you need to insure yourself because you are the key person in your organization. Obviously if you die, your business dies with you.
Protect your family
You need to protect your investment of time and money so that if you die your family is able to have economic capability to subsist without you, without necessarily changing their lives dramatically. Along the lines of protecting your family, you also need to replace your income.
If you were to pass away, one thing that we recommend to follow is the 10 times income rule. Take your annual income that you get through your business and multiply it by 10. This is a good starting number to figure out how much life insurance you need to put on the books to replace your income.
This is what I did when I first became a self employed person selling life insurance. I bought 10 times my annual income in order to protect my family and make sure that they could survive somewhat comfortably if I were to die earlier than expected.
As an entrepreneur, many of you will eventually, if not already, request financing from a bank or some sort of a financier. One of the things they’ll ask in the process of getting a bank loan is what would happen if you pass away? How would you know if you would get your money back? That’s a tough question to answer. What you’ll find most likely happens is that the only way to guarantee the bank that you’ll be able to pay their money back if you pass away is to insure against that loan with a life insurance policy.
Generally speaking, the kind of policies we use to collateralize a loan and protect the bank are short 5, 10, 15 year term notes that are cheaper in price, but cover for the entirety of the bank loan. We can help you with these kinds of loans that are simple, competitively priced and designed to protect the bank’s interest while allowing access to capital to grow your business. Feel free to contact us at Buy Life Insurance for Burial for help with your loan collateral questions.
If you’re an entrepreneur and have a mortgage that you’re making payments on, then you might want to consider buying a life insurance policy. In addition to a policy replacing your income, it can also protect your mortgage and pay it off so that your family isn’t responsible for it. Many people do without life insurance and when they pass away their house has to be sold as is. As an entrepreneur, you know if you have to sell something immediately without delay, you’re not going to get the best price for it.
A mortgage protection program through a life insurance policy is designed to liquidate the mortgage loan and allow your family to own their home, free and clear, therefore protecting them from being dispelled because they can’t afford to keep up with the payments.
Loss of key team member
If you’re a small business owner, self employed, or an entrepreneur and have a small team of professionals you work with, it’s likely someone besides yourself plays a key role in the expansion of your business. Maybe it is a vice president or a sales manager that has key contacts with different clients that allows you to continue your profession and continue your service and growth of your business.
Imagine if that key person responsible for an important aspect of your business happens to die. It will take time to find someone to replace that person. Your clients will be dramatically affected by the loss and expect the same type of service from a new employee. This could affect your finances and service capabilities.
So a simple solution is to provide a key person policy where the company pays the premium on a key person who is insured and the company is paid a death benefit upon the key person’s death.
Hopefully your goal in business is to either free yourself from having to work for somebody else, or to eventually build up a business to sell it and retire with a nice lump sum of money.
And you probably also understand the importance of saving, which is why if you die earlier than expected, you won’t have the opportunity to save for the kind of retirement you’re looking for. A life insurance plan can provide a great resource to replace earnings you would put into your retirement.
Retirement funding program
You may be interested in life insurance not as a vehicle to pay money when you die, but to pay money while you are still alive. These are what we call safe money life insurance programs, a retirement supplement, or life insurance retirement programs that are designed to grow in value over a period of time and provide tax free sources of money that you can use later on to supplement your retirement plan.
Typically these plans will utilize index universal life programs that have growth factors tied to the market as it increases, but also protects you on the downside in case the market collapses. So the risk of losing your money is minimized. This is a great way to grow money in a safe way if you feel that putting your money in the stock market is a risk.
Buy, sell agreement
We use buy, sell agreements to create an opportunity for those who are self employed and have partners to buy out a partner’s interest if they pass away to allow the business to remain in continuity. Many times when a partner dies the company experiences the partner’s family becoming heir to the company.
When a new person gains control and is entrusted with part of your business, the new partner may want to change things, at the cost of the businesses’ time, money, and customers. This could lead to eventually having to close down because the family’s interest is totally different than what the surviving partners believes is best.
A buy, sell agreement allows for there to be financing through a life insurance policy to bid out and pay the surviving family members for their portion of the ownership in the business. In exchange it allows the corporation to be fully owned by the surviving partner.
Types of life insurance available for those who are self employed or entrepreneurs
You may be wondering what kind of plans are best for those who are self employed or an entrepreneur. Well, it all depends on your reasons for buying insurance. By identifying what matters most to you in the above reasons, you’ll be better able to determine which life insurance product is best for you.
After considering the reasons to buy insurance, let’s look at the types of insurance available. I’ll give you my recommendation as to why an individual would want to purchase one plan over another.
Term insurance is the most popular form of life insurance. It’s the cheapest way to get the most amount of coverage and is perfect for temporary obligations such as loan collateralization, obligation debt, pay off such as mortgages and replacing your income if you die earlier than expected.
The downside is that term insurance has a future end date. If you outlive the policy, which generally last 10, 20, or 30 years, depending on how you design it, you won’t have coverage anymore. However, it’s a good idea for as long as your insurance goals are matched to what a term policy can provide.
Term Life Insurance Coverage – 10 Year Term – $100,000 in Coverage
Term Life Insurance Coverage – 10 year Term – $250,000 in Coverage
Term Life Insurance Coverage – 10 year Term – $500,000 in Coverage
Term Life Insurance Coverage – 10 year Term – $1,000,000 in Coverage
Whole life insurance offers a permanent protection design. For permanent obligation protection, it is usually five to 10 times more expensive per dollar coverage.
As far as face amount of coverage goes, whole insurance is generally not as often purchased except in circumstances where a buy, sell agreement needs to be funded with a permanent plan. Otherwise, many people buy whole life insurance plans because they’re looking to develop a cash value and have a source of funding that has tax free advantages different than financing.
Rates For $10,000 In Burial Insurance
Rates For $25,000 In Burial Insurance
$150,000 Whole Life Insurance, Life Pay
$250,000 Whole Life Insurance, Life Pay
Universal life plans
Universal life plans are hybrid plans that are somewhere between term and whole life insurance. You can pick the length of time in which you design a universal life plan, and you can also design it like mentioned earlier using an index universal life plan to generate cash values in a tax advantage manner without exposing yourself to the downsides of the stock market.
$50 a Month – Guaranteed Universal Life Insurance
$100 a Month – Guaranteed Universal Life Insurance
$150 a Month – Guaranteed Universal Life Insurance
Should I get an exam?
As a small business owner myself, I know you’re probably slammed busy, constantly dealing with clients, vendors, and employees, and probably can barely find the time to do much of anything besides living inside of your business, so you may be a little bit turned off by the idea of doing the exam.
However, my recommendation is to consider doing the exam in conjunction with your life insurance because it’s going to allow you to get the most economical advantage out of your life insurance without having to pay more than you have to pay. An exam gives the insurance company the most up-to-date information regarding your health in the form of physical and vital signs and analysis.
Providing this information generally provides better rates. So if you’re in good shape, take an exam for the best price. Otherwise, if you don’t like the idea of doing an exam, or if you’re just too busy to schedule one, you do have the option to do a non-medical application that will just rely on previous medical records.
While you may pay a higher price with a non-medical application because of limited information, you will get your life insurance issued at a faster rate and often won’t have to deal with rate ups because of unforeseen health factors.