08 Jun Life insurance when you’re self-employed

Q. I have life insurance thorough my job, but I’m thinking of leaving to start my own business. How can I choose the best policy for me if I’m on my own? I’m divorced with one son who is six, and I’m doing pretty well financially.
— New venture, maybe

A. Being a business owner is very rewarding, so we wish you luck and lots of success.

Before deciding on the best life insurance policy, you need to ask yourself several questions, said Ed Gaelick, a Chartered Life Underwriter and Chartered Financial Consultant with PSI Consultants in Glen Rock.

First, is your desire for life insurance a temporary or permanent need or want?

“To put it another way, assuming the death benefit would be for your son, would you want coverage in force regardless of when you die?” Gaelick said. “If so, permanent life insurance makes sense.”

You say you’re doing pretty well financially, so next, ask yourself: Would you want to have a policy that builds cash value while alive?

If so, permanent life insurance makes sense, Gaelick said.

“Then the type of permanent coverage — and there are many — is the debate,” he said. “Whole life insurance from a mutual life insurance company builds cash value, has guarantees, accumulated values are not subject to market risk, you’d share in the insurance company’s profits, have increasing death benefits keeping pace with inflation and more.”

If the plan is to have only temporary protection, such as only until your son graduates from college or a mortgage is paid off, then term life insurance would make some sense, he said.

Once you decide between term and a permanent policy, the next decisions are which insurance company, amount of coverage and years to lock in rates.

Gaelick recommends you find an experienced broker who can help you navigate through all your options.

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This post was first published in June 2017.