Life Insurance for Artists and Freelancers

One of the common problems that artists and freelancers have is irregular income. Projects may be inconsistent; some months will have high-earnings while others will offer none. This can make it quite hard to plan well financially. This is where life insurance plays a role in long-term security.  

Unstable finances affect life insurance. Insurers always prefer a stable income to approve a policy. This can make it complicated to secure a policy with adequate coverage and low premiums. It may require artists and freelancers to engage in stricter financial planning. For this reason, funds set aside during high-earning periods can be used to balance other low-earning months. With a good and solid financial plan you can secure life insurance and make sure you’re taken care of if anything unexpected were to happen.

In this article:

• How Can I Manage Life Insurance Premiums on an Unpredictable Income?
• How Much Life Insurance Do You Need?
  • Case Studies and Examples 
• Choosing The Right Life Insurance Policy for Freelancers
  • Special Advice for Freelancers
• How Artistic Lifestyles Might Influence Life Insurance Premiums (Travel, Smoking, etc.)
• Frequently Asked Questions (FAQs) about Life Insurance for Artists and Freelancers

How Can I Manage Life Insurance Premiums on an Unpredictable Income?

The premiums for life insurance are often difficult to manage with an irregular income, but there are ways to make it easier. Budget for your life insurance premiums as fixed monthly expenses. This will ensure that you consider your coverage one of your priorities. Consider getting a policy where you have the flexibility to pay premiums according to your schedule. Some insurers offer flexible options of payments, such as annual, semi-annual, or quarterly payments, which can always be tailored to your cash  flow. It also makes sense to establish an emergency fund that would cover your premiums in times of financial difficulties. If your income is highly variable, you might prefer policies that allow for premium holidays, where you can miss payments without losing cover. Finally, always communicate with your insurer. They can provide options to maintain your policy if you face temporary financial difficulties.

How Much Life Insurance Do You Need?

One important aspect about setting the right level of life insurance as an artist or freelancer is knowing your unique financial situations and responsibilities. Here’s how you can estimate getting adequate coverage by considering some key factors and using helpful tools and resources. 

When determining the amount of life insurance a freelancer needs, consider your debts, dependents, and upcoming expenses. Account for your debts such as mortgages, student loans, credit card debt, and any business-related money owed. As a person with dependents, consider how to care for them financially. This includes everyday living, education, and health expenses. Also keep in mind long-term financial support such as college tuition for children or retirement savings for the spouse.

There are many tools and ways to help a freelancer estimate what the right coverage is. Online life insurance calculators from NerdWallet or Bankrate can input financial information and give you an estimate. Review both personal and business finances adequately to know the income, expenses, and financial targets. One of the most common estimations for coverage is the income replacement method that generally takes your annual income and multiples it by a factor, for example, 10 to 15 times your annual income. Calculations should be made of those funds necessary to replace your income for at least a specified number of years to support dependents.

Case Studies and Examples 

Example 1: Freelancer with Debts

Situation: Jane, a 30-year-old freelance graphic designer, has $50,000 in student loans and a $200,000 mortgage. She has no dependents.

Calculation: Jane estimates she needs enough coverage to repay her obligations. She settles on $300,000 term life insurance to ensure her obligations are paid back.

Example 2: Freelancer with Family

Scenario: Jacob is a 40-year-old freelance writer who is married with two young kids. He has a mortgage of $150,000 and car loans totaling $20,000. He is concerned that his children will not be able to go through college because there is not enough money.

Calculation: John uses the income replacement method and calculates that he needs $1,000,000 of coverage to replace his income for 10 years plus pay off debts, and fund other future expenses, such as college tuition.

Example 3: Freelancer with Varying Income

Scenario: Lisa, aged 35, works as a freelance photographer and has a variable income, and she is worried about a stable financial future for her family.

Calculation: Lisa reviews her average income on an annual basis and using available online calculators, computes her estimation on debts, dependents’ needs, and future costs. She settles for a universal policy that can offer $500,000 at maximum. This will give her flexible coverage, which will adjust as her financial status changes.

Choosing The Right Life Insurance Policy for Freelancers

When it comes to life insurance, freelancers face unique challenges due to income variability and lack of employer-provided benefits. Here’s an overview of the types of life insurance policies suitable for freelancers, along with their pros and cons, and specific recommendations based on income stability and financial goals.

Term Life Insurance: Term life insurance is a type of policy that provides coverage over a given number of years, such as 10, 20, or 30 years. If the insured person dies within that period, the beneficiaries will receive the death benefit.

Pros:

• Affordability: In most cases, it is less expensive.
• Simplicity: Straightforward with no investment component.
• Flexibility: Can be geared to specific goals, such as mortgage payoff or college funding.

Cons:

• Temporary Insurance: Insurance runs out when the term ends; it has no cash value.
• Increase in Premium: The premiums may be hiked if you renew after the term expires.

Recommendation: Great for freelancers who want greater coverage but with a lower price point and are looking at preparing for specific financial responsibilities.

Whole Life Insurance: Whole life insurance has lifetime coverage, level premium, and a cash-value feature that grows with time.

Pros: 

• Lifetime Coverage: This ensures the insured remains covered for life.
• Cash value: Builds over some time and can be borrowed against.
• Fixed Premiums: The premiums in this plan never change over the course of the policy.

Cons:

• High Expense: Much costlier than term life insurance.
• Complexity: The cash value component can sometimes be complex.

Recommendation: Ideal for a freelancer with predictable income looking for long-term financial planning combined with the added benefit of a cash-value feature.

Universal Life Insurance: Universal life is a type of permanent life insurance with the provisions that the premium, cash value, and face amount can be adjusted. A part of the cash-value component that earns interest is included.

Pros:

• Flexibility: Adjust premiums and death benefits to match financial situations.
• Cash Value: Accumulates interest and can be used for loans or premium payments.
• Lifetime Coverage: It provides protection over a lifetime.

Cons:

• Complexity: More complicated than term life and whole life insurance.
• Variable Costs: A variable cost of insurance will increase the policy cost directly and impact the growth of cash value.

Recommendation: Best for people who are self-employed and, therefore, their incomes fluctuate from time to time, making it flexible to pay the premiums. It’s also easy for one to accumulate cash values.

Special Advice for Freelancers

Income Stability: Freelancers who receive more stability and predictability in their incomes can benefit from whole or universal life insurance, which covers the entire lifespan and also accrues cash value benefits. Such policies can be used as a long-term financial strategy.

Financial Goals: Term life precisely covers the need for financial goals or debts such as a mortgage or student loans, providing coverage with the process. It remains one of the most cost-effective insurance coverages since it offers a high coverage at a low premium at important financial stages.

Cash Value: If importance lies in saving money or maintaining an emergency fund, then one added advantage that whole life and universal life insurance policies provide is cash value accumulation, which can be a very attractive feature for freelancers who do not have steady incomes.

How Artistic Lifestyles Might Influence Life Insurance Premiums (Travel, Smoking, etc.)

An artistic lifestyle may impact life insurance premiums in a few different ways. Frequent travel can result in higher premiums due to an increased risk of being in an accident. Smoking or use of some substances, common in many artistic communities, can similarly elevate the rate. Fluctuating income tends to make qualifying for certain policies more challenging. More types of dangerous activities could lead to even greater premium costs, such as stunt work or handling hazardous materials. Insurance companies evaluate these and other variables to determine the level of risk and what premiums would be associated.

Conclusion 

Knowing how the creative and freelance lifestyles influence life insurance premiums can help in the better planning of needs and coverage. By considering factors like travel, smoking, and income stability, artists and freelancers can take steps to manage their risks. Working with an insurance broker who specializes in high-risk cases can provide tailored solutions. With careful planning and the right guidance, both artists and freelancers can enjoy their creative and professional pursuits while ensuring financial protection for themselves and their loved ones.

Frequently asked questions (FAQs) about Life Insurance for Artists and Freelancers

Find a solution for what you’re looking for 

With the right knowledge and preparation, artists and freelancers can secure life insurance that fits their unique lifestyles and provides essential financial protection. At Protect Your Wealth, we work with and compare policies and quotes from the best life insurance companies in Canada to ensure the best solution for you and your needs. We provide expert life insurance solutions, including no medical life insurance, critical illness insurance, term life insurance, and permanent life insurance to build the best package to give you the protection you need.

Contact Protect Your Wealth or call us at 1-877-654-6119 to talk to an advisor today! We’re proudly based out of Hamilton, and service clients anywhere in Ontario, British Columbia, Alberta, and Manitoba including areas such as Waterdown, Calgary, Surrey, and Winnipeg.