Life Insurance for the Self-Employed

Yes, self-employed life insurance works in exactly the same way as a policy for anyone in employment. Insurers base your premium on your age, health, smoking status and how much cover you want, never on whether you're a sole trader, a limited company director or a contractor. Around 4.3 million people in the UK are self-employed, according to ONS Labour Force Survey estimates, and every one of them is eligible for standard life insurance on the same terms as an employed applicant.

What does change is how you prove your income to the insurer and which product fits your working structure best. A sole trader typically applies for and pays a standard personal policy from taxed income. A limited company director can instead set up Relevant Life Insurance, paid for by the company rather than personally. A contractor's options depend on how they're actually set up: as a sole trader, through an umbrella company, or via their own limited company. None of this affects whether you can get cover, only how you apply for it.

Life insurance carries more weight when you're self-employed because you've lost the safety net an employer builds in automatically. Employees typically get a death-in-service benefit worth two to four times their salary, paid tax-free to their family if they die while employed, with no medical underwriting and no separate policy to arrange. Most employees also get statutory sick pay of £116.75 a week for up to 28 weeks if they fall ill, and some get group life or income protection cover on top.

• Death-in-service: Usually worth 2 to 4 times annual salary, arranged and paid for entirely by the employer.
• Statutory sick pay: A guaranteed income floor while an employee recovers from illness or injury.
• Group life or income protection: Often included as a workplace benefit with no individual underwriting.

None of this exists if you work for yourself. If you die or become too ill to work, your household's income can stop overnight, which is why arranging your own cover matters even more than it does for an employee.

Your trading structure doesn't affect whether you can get life insurance, but it does affect how you pay for it, and if you run a limited company, it opens up a genuinely tax-efficient option that most self-employed people have never heard of.

Sole traders

If you're a sole trader, you buy and pay for a standard personal life insurance policy from your taxed income, exactly as an employee would. Premiums aren't tax-deductible because HMRC treats life insurance as a personal expense rather than a business cost, regardless of how central you are to your business's income.

Limited company directors: Relevant Life Insurance explained

Relevant Life Insurance for directors lets your limited company pay the premiums directly rather than you paying from personal income that's already been taxed. The company can usually treat the premiums as an allowable business expense for corporation tax purposes, and because it's structured as a death-in-service benefit rather than salary, there's no benefit-in-kind charge and no employee or employer National Insurance to pay. It works well for single-director companies and small teams who want a death-in-service style benefit without setting up a costly group scheme. One condition matters: the payout must be written in trust and paid to your family or nominated beneficiaries, not back into the business.

Contractors and CIS workers

How you're underwritten depends on how you actually work, not on the word contractor itself. If you invoice as a sole trader, you're treated as a sole trader. If you work through your own limited company, the Relevant Life route is available to you too. If you're paid via an umbrella company as an employee, you may already have some employer benefits worth checking before buying separate cover. Your IR35 status affects how your income is taxed, not whether an insurer will offer you a policy.

Self-employed life insurance costs exactly the same as it would if you were employed, because insurers don't price on employment status. What actually moves your premium is your age when you apply, your health and medical history, whether you smoke, and how much cover and how long a term you choose. A healthy 30-year-old non-smoker might pay from around £5 to £8 a month for £150,000 of level term cover over 25 years, while the same cover for a 50-year-old typically starts from £20 to £30 a month, because age is the single biggest driver of price.

The one place self-employment genuinely enters the cost conversation is affordability planning. If your income fluctuates month to month, it's worth choosing a premium you can comfortably cover in a lean trading month, not just a good one, since missed payments can lapse your policy. For a full breakdown of how much life insurance costs across ages, health profiles and cover amounts, see our dedicated cost guide.

Because you don't have an employer to confirm your salary, insurers ask self-employed applicants to prove their income before agreeing to certain levels of cover, particularly once you're asking for more than around 10 times your annual income. This isn't a barrier to getting covered, it's simply how underwriters work out how much cover is reasonable to offer against what you actually earn.

• Most recent SA302 or tax calculation: HMRC's summary of your self-assessment tax return, usually requested for the last one to two years.
• Two to three years of accounts: For limited company directors, insurers typically want certified accounts or an accountant's reference confirming salary and dividends.
• Recent business bank statements: Three to six months of statements to show trading is active and income is consistent with what you've declared.
• Projected earnings for newer businesses: If you've traded for under 12 months, insurers may accept a shorter track record alongside a realistic income projection, though the cover amount offered may be more conservative until you have a longer history.

None of this affects whether you're eligible for cover, only how much an insurer will offer against your income. Gathering these documents before you apply speeds up underwriting considerably and avoids delays once you've already committed to a policy.

The right type of life insurance for you depends on what you're actually protecting against, not on the fact that you're self-employed. Most self-employed applicants are choosing between a handful of structures, each suited to a different need.

• Level term life insurance: A fixed payout if you die within a set term, useful for a clear, unchanging need such as replacing a fixed sum for your family.
• Decreasing term life insurance: Cover that reduces roughly in line with a repayment mortgage balance, which keeps premiums lower over the term. See decreasing term life insurance for your mortgage if that's your main reason for buying cover.
• Family income benefit: Instead of a lump sum, this pays your family a regular monthly or annual income for the rest of the term, which can suit self-employed households used to living off a monthly income rather than managing a lump sum. Read more about family income benefit, which pays out as a regular income.
• Guaranteed insurability options: Some policies let you increase cover later without new medical underwriting, useful if your income and mortgage grow as your business does.

Before choosing between these, it's worth taking the time to work out how much cover you need based on your debts, dependants and how many years of income you want to replace, rather than picking a round number.

Life insurance and income protection solve two different problems, and for self-employed people they work best together rather than as an either/or choice. Life insurance pays out a lump sum or income to your family if you die during the policy term. Income protection replaces part of your income if you're too ill or injured to work, which is arguably the more immediate risk when you have no statutory sick pay and no employer to fall back on for even a few weeks.

A relatively minor injury that would mean a few days off for an employee, backed by sick pay, can mean weeks with no income at all if you're self-employed and physically unable to work. Insurers typically pay income protection as a monthly amount, often up to around 50 to 60 percent of your usual income, after a chosen waiting period, until you're fit to return or the policy ends. Pairing life insurance with a self-employed income protection guide covers both the risk of dying and the far more statistically likely risk of being unable to work for a period.

Writing your life insurance policy in trust means the payout goes directly to your chosen beneficiaries rather than into your estate when you die, which usually means it's paid out faster and sits outside your estate for inheritance tax purposes. Without a trust, a payout can be tied up in probate for several weeks or even months while your estate is administered, which is a serious problem for a self-employed household with no redundancy pay or cash reserve to fall back on in the meantime.

If you're a limited company director taking out Relevant Life Insurance, writing the policy in trust isn't optional, it's a condition of the product, because the payout is required to go to your family or nominated beneficiaries rather than back into the business. Setting up a trust is usually free and takes only a few extra minutes when you apply, using a standard trust form provided by the insurer. For the full mechanics of how it works and which type of trust to choose, see writing your policy in trust.

Getting a life insurance quote as a self-employed applicant follows the same process as anyone else, with one extra step: having your income proof ready before you start.

1. Gather your income documents: Your most recent SA302 or tax calculation, two to three years of accounts if you're a director, and recent business bank statements.
2. Decide your route if you're a director: Work out whether a personal policy or Relevant Life Insurance through your company makes more sense, ideally with input from your accountant.
3. Compare quotes across multiple providers: Premiums for the same cover can vary significantly between insurers based on how each one underwrites self-employed applicants and pre-existing health conditions.
4. Disclose your occupation and trading structure accurately: Some occupations carry different risk ratings, and inaccurate disclosure can affect whether a claim is paid later.

Working with a whole-of-market adviser rather than a single insurer means your application is matched against providers who underwrite self-employed income the way you'd expect, rather than applying a generic employed-applicant checklist that doesn't fit your circumstances. Comparing quotes side by side, with your cover amount already worked out and your income documents to hand, puts you in a stronger position to choose a policy you'll actually keep paying into.