Life Insurance for the Self-Employed
Left the 9-5 to build something of your own? Here's what happens to your life insurance — and what to do about it. Free consult, Toronto.
Jacob Citron
7/17/20263 min read
Life Insurance for the Self-Employed: What Nobody Tells You When You Go Out On Your Own
I talk to a lot of people who left a steady job to work for themselves. Lawyers who left big firms. Consultants. Real estate agents. Massage therapists. Artists. People who bet on themselves.
Almost every one of them remembers the moment they started their business. None of them remember that when they left a 9-5, their group life insurance quietly disappeared with it.
That's not a knock on anyone. It's just how it goes. When you're employed, someone else handles this by default. A policy comes bundled with the job, premiums come off your paycheque before you even notice, and nobody ever asks you to think about it. You're covered because you clocked in somewhere.
The day you go out on your own, that default disappears. And there's no "how to start my business" course. In other words, nobody tells you you aren't insured.
The safety net you didn't know you had
Most people don't think of their group benefits as insurance so much as a line item on an offer letter. It's just there. Which is exactly why so few people replace it when it's gone.
I've had clients realize this a year or two into running their own business — usually not because they sat down and audited their coverage, but because something prompted it. A client asked what happens to the contract if something happens to them. A partner brought it up. Or they just had a quiet moment wondering what their family would actually be left with if things went sideways, God forbid, and they realized the honest answer was: less than they thought.
Why self-employed coverage isn't harder, just different
Here's where people tend to assume the worst. They think because their income isn't a steady T4 salary, getting insured is going to be complicated, expensive, or require some kind of forensic audit of their finances.
It isn't, and it doesn't. It's just a different starting point.
When you're employed, an insurer looks at your salary and calls it a day. When you're self-employed, we typically look at your income over the last two to three years — averaged, not cherry-picked from your best quarter — along with what your business actually does and how established it is. A first-year freelancer with lumpy income gets underwritten differently than someone running a profitable practice for a decade. Neither one is disqualifying. It just means the conversation starts with a bit more context than "here's my pay stub."
In other words: variable income doesn't mean you can't get properly covered. It just means the math looks a little different, and a broker who's done this before knows how to build the case.
What's actually on the line
For an employed person, the calculation is fairly straightforward — mortgage, dependents, income replacement. For a business owner, there's usually a second layer sitting quietly underneath that.
Business debt with your name on the personal guarantee. A partner who's counting on you being there. Clients or contracts that exist specifically because of your relationship with them, not some interchangeable employee. If you're the business, in a very real sense, then the business is also exposed every time you are.
While there are more advanced strategies in place, key person insurance or buy-sell agreements — those are a separate conversation for a separate day. What we're talking about is simpler: making sure that if something happens to you, your family isn't left untangling a business and a mortgage and everything else at the same time, with nothing to fall back on.
Where to actually start
The starting point is the same conversation any good insurance agent should start with: who depends on you, what are your financial obligations, and what would actually need to happen financially if you weren't there. The only difference for someone self-employed is that we spend a bit more time on the income side of that picture, and a bit more time asking what the business itself owes and who it leans on.
It's not particularly complicated, it just is not typically a priority when you're building your empire.
If you left a steady job to build something of your own, and you haven't thought about this since you handed in your notice, that's a completely normal place to be. It's also worth a conversation before it becomes an emergency one.
Reach out any time. That conversation is always free.