Self-employed Canadians are in a different position when it comes to life insurance. Without a workplace benefits package, the conversation about protection usually falls to you. This article explains why that matters and what tends to shape the picture.
Nothing here is a recommendation or tax advice. The right approach depends on your individual circumstances, and product terms vary by insurer. Where tax is mentioned, it is general, and you should consult an appropriately qualified professional about your own situation.
Lack of workplace benefits
Many self-employed people do not have access to group life insurance through an employer. That means there is no workplace coverage to serve as a starting point, the way there is for many employees.
This is one reason self-employed people often review life insurance on their own. Without that baseline, the question of protection is one you have to ask and answer yourself. It also relates to whether workplace coverage is enough, since here the answer is often that there is no workplace coverage to begin with.
Household reliance on business income
For many self-employed people, the household depends on the business income. If that income were no longer there, the household could face both the loss of the person and the loss of the income the business generates.
That dual dependence is part of why life insurance can matter for self-employed people. It is not only about the person; it is about the income the person produces.
Debt
Self-employed people may carry both personal and business debts. A mortgage, a business loan, a line of credit used for the business, or obligations to suppliers can all be part of the picture. If the person were no longer there, how would those debts be handled?
This is part of thinking through how much coverage may make sense, and it connects to how much life insurance you might need.
Personal versus business needs
The needs can overlap. A self-employed person may want personal life insurance to protect their household, and there can also be business-related considerations, such as what would happen to the business if the owner were no longer there. Those are distinct questions, and they can call for different approaches.
Business-related insurance, such as coverage tied to business continuity or a co-ownership arrangement, is its own topic. Here the focus is the personal protection side, but it is worth knowing the two can connect.
Income variability
Self-employed income can vary from year to year, which can make both affordability and the right coverage amount harder to pin down. A coverage amount and premium that fit in a strong year might feel different in a slower one.
That variability is worth building into the thinking. A sustainable approach is usually better than one that works only in the best years.
Reviewing protection independently from employer benefits
Because self-employed people do not have employer benefits to rely on, reviewing protection independently is often the starting point rather than a follow-up. That can actually be a good thing, since it puts you in control of the amount, the type, and the terms, rather than accepting a default.
You can read about term life insurance as one common starting point, and about what affects the cost of life insurance to understand what drives pricing.
If you are self-employed and would like to think through life insurance in the context of your income, your business, and your household, I can help you work through it, in plain language and with no pressure.