If there’s one thing that self-employed individuals forget to do, it’s purchasing adequate insurance coverage for themselves and their families.
Over 90% of Canadians are under-insured or uninsured, which is even higher amongst self-employed freelance professionals.
Did you know Canadians are more likely to insure their pets than they are to insure themselves by purchasing life or disability insurance adequately? While we adore our pets (the Oomple team can truly attest to this 🐶), we can’t forget about ourselves.
We know that insurance is not a sexy topic per se, but it’s essential! If you don’t have appropriate coverage, you're potentially one event away from financial hardship.
If you're a consultant or freelance professional and choose to forgo insurance, the decision should be an informed one. You should have a solid financial plan in place, along with emergency savings, to cover two things – your debts and your income.
So, let’s dive into why you might want to get insured if you’re working freelance – and then you can decide what makes sense for you!
Debt & protecting your loved ones
It’s not something we often think about (or want to think about), but when you are no longer here (knock on wood), your debt can be passed on to your loved ones.
Unexpected passings can be extremely expensive for those left behind. Canadians are, on average, $76,000 in debt, and this figure is rising due to increased housing and living costs.
Debts such as your mortgage, credit cards, student loans, and car loans can be inherited. Rather than leave your family with a mountain of payments, you can develop a financial plan to minimize that burden. Don't you worry. There are several ways you can plan.
1. Emergency savings 👈
Create an emergency savings fund that covers the amount, or more, of your debt. Make sure your loved ones have access to the funds so that they can pay off your outstanding debt in such event.
Realistically speaking, between saving up for a home or paying one off, and putting money into RRSPs, along with all of life’s other expenses, it’s often hard to save enough to cover your debts. If you had that money, you would probably use it to pay them off. In that case, consider life insurance.
2. Life insurance 🙌
Life insurance would pay your loved ones a cash lump sum and this cash can be used to pay off any and all debts.
As with any insurance policy, you will have to pay premiums, but if you are relatively young and healthy, you can get coverage for as little as $9 per month! With premiums so low, and the benefits so high, a life insurance policy makes sense if you have lots of debt!
Common misconception
With life insurance, there is a common misconception. Often people make the mistake of thinking that if they are covered under their spouse or partner’s benefits, they don’t need life insurance. Unfortunately, this is pretty misleading. Benefits under a spouse’s plan usually only cover $5k - $10k, which is not enough to cover the debt of most Canadians.
Protecting Your Income
Your paycheck is your most important asset if you’re self-employed, and that’s why you should work through trusted platforms that ensure safe and easy payments as a freelance professional. If you suddenly cannot work for any reason, from severe depression or anxiety to unexpected diagnosis or injury, it can be financially devastating.
The chances of being too sick or injured to work are higher than you think. If you're in your 30s, you have a 50% chance of being out of work for 2 years or more during your working life. Most self-employed professionals are not financially prepared for this common risk.
With injury and illness being so common, it’s crucial to have a financial plan to cover lost income! Here are a couple of the several ways you can plan:
1. Emergency savings 👈
You should ensure that you have enough savings to cover at least 2 years’ worth of lost income. So if you make $100,000 a year from working as an on-demand professional, you should put away $200,000 into your emergency fund. Again, most Canadians do not have the wiggle room in their budgets to save such a large amount to store away. If this is your financial reality, then consider disability insurance.
2. Disability insurance 🤝
This type of insurance will cover a portion of your income and pay out a monthly payment if you cannot work for any reason. It covers a wide range of injuries and illnesses, including mental health, critical illness and accidents.
Pro tip: A good broker can help you find a policy that gets you the coverage you need while keeping costs low.
How to get insurance
Oomple is dedicated to providing on-demand professionals with value and information so you can understand what works best for you and that you can protect yourself.
We trust Bounc3, as they are genuine and transparent in their vision of helping the self-employed. You can get a free and fast quote for life and disability illness insurance online with Bounc3.
Bounc3 specializes in finding self-employed Canadians comprehensive insurance at the best price! Their handpicked policies will ensure you only compare quotes on products most relevant to you as a Canadian on-demand professional.