Best Self-Employed Life Insurance in Canada

Quick answer: what type of life insurance do self-employed Canadians and business owners need?

Term life insurance is the best fit for most self-employed Canadians and small business owners.

Life insurance for business owners and self-employed people may benefit from higher coverage amounts, since you may lack typical workplace benefits.

Why term life insurance is the smartest choice for self-employed Canadians

Term life insurance is usually the ideal choice for most self-employed Canadians—from gig workers to small business owners—who have financial obligations like dependents and a mortgage. 

Term life policies are designed to cover a vulnerable period in a family’s life without draining your finances. Term coverage is flexible and reliable. It’s a good fit for self-employed Canadians looking for an affordable safety net to protect against the financial consequences of an unexpected death. 

By contrast, permanent life insurance policies are ideally used as an estate planning tool. Premiums are 5–15x higher than term coverage, but you get lifelong coverage that will provide a death benefit to your loved ones regardless of when you die. Permanent coverage is the less cost-effective choice for most Canadians, especially self-employed people on a tighter budget who don’t need lifelong coverage.

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Best term life insurance for self-employed Canadians

From freelancers to small business owners, self-employed Canadians can secure peace of mind for their loved ones with a term life insurance policy. We analyzed over 450,000 term life insurance quotes from trusted Canadian carriers and chose the top five plans for self-employed workers: 

^{* Our star ratings are based on a mix of each provider’s financial stability and Google Review scores, and each product’s pricing and ease of purchase.}

^{**For each product, we calculated the average monthly premiums for a female non-smoker. The results show the approximate cost of a 10-30-year term life insurance policy with $600,000 of coverage.}

Term life insurance by PolicyMe

Solution by the Empire Life Insurance Company

RBC YourTerm by RBC Life Insurance

Term life insurance by Foresters

Term life insurance by Desjardins

"Term life insurance is a simple and affordable way to protect your family’s financial future. The key is finding a policy that balances affordability with the right coverage amount." — Christelle Arouko, Licensed Insurance Advisor

Why self-employed Canadians may need life insurance more than employees

Self-employed Canadians and their families are more exposed to financial risk than salaried employees, so life insurance policies can help ensure the family’s stability if the self-employed person passes away suddenly.

• Families may rely on a single earner
• Lack of workplace life insurance
• Business debts may be personal
• Business continuity may be at risk

Some families rely heavily on a self-employed person’s income. The truth is that even a very successful solopreneur may not enjoy the same workplace protections that a salaried employee enjoys, so life insurance and income replacement are extremely critical.

Entrepreneurs may also be eager to ensure the continuity of their business. A life insurance policy can provide funds to cover operating costs, repay the owner’s line of credit, hire a replacement, or support a buy-sell agreement. 

Self-employed life insurance: freelancers vs. incorporated business owners

Without employer-provided benefits, both types of non-salaried workers (whether freelancers or incorporated professionals) should consider personal life insurance policies. 

Here’s how the personal coverage needs of freelancers vs. incorporated business owners may vary:

Some incorporated business owners may also want to supplement with a business-owned policy, like key person or buy-sell insurance. But this policy will protect the company’s continuity, not your loved ones.

Term life insurance is a good place for every self-employed person to start. A personal policy is an affordable, simple way to protect your loved ones and your business.

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Do you need other types of insurance?

Life insurance isn’t the only type of insurance self-employed Canadians may need. Other types of financial protection typically included in employer-sponsored group insurance plans include health insurance, critical illness insurance, and disability insurance. Consider whether you need these protections when setting up your life insurance.

Calculate your life insurance needs as a self-employed worker

Your life insurance policy should include enough coverage to cover any major debts, maintain ongoing financial obligations like business expenses, and meet your dependents’ financial needs until they’re financially independent. $500,000 is the most common coverage amount among Canadians, but your needs may vary.

The simplest rule of thumb for life insurance coverage is to purchase coverage equal to 7-12x your annual income. But for some self-employed individuals, that calculation isn’t the most reliable, since your income may vary depending on your field, the season, and the year. 

You can also use the DIME method, which works by combining: 

• Your total debts
• Your average yearly income multiplied by the number of years you’d need it replaced
• Your mortgage payments, and
• Your children’s education costs 

To simplify the math, you can use an online calculator like PolicyMe’s free life insurance calculator to estimate the amount of life insurance coverage you need to buy. Enter basic details about your household income, ongoing expenses, debt, and assets, and you’ll receive three coverage recommendations: a low, moderate, and high-coverage option to help you fit your insurance to your budget. 

“Term life insurance is a simple and affordable way to protect your family’s financial future. The key is finding a policy that balances affordability with the right coverage amount.”— Christelle Arouko, Licensed Insurance Advisor

Example #1: Parent with a mortgage? Higher coverage, longer term policy

Maria is 38 years old with two dependents, a larger mortgage, and some small business debt.

• Family status: Two young children
• Employment: Self-employed, $85,000 per year
• Financial needs: $420,000 remaining on mortgage, $30,000 personal debt, $80,000 for kids’ future tuition
• Income replacement: $85,000 x 10 years (until her kids are closer to financial independence)

The best policy for Maria is a 20-year term policy with $1–$1.5 million in coverage to clear her debts and cover her while the mortgage is still being paid off.

Example #2: Contractor with no kids? Lower coverage, shorter term policy

Tarik is 45 years old with a partner but no children. He has a smaller mortgage and healthy savings for retirement.

• Family status: Partner, no kids
• Employment: Self-employed, $110,000 per year
• Financial needs: $90,000 remaining on mortgage, $18,000 personal debt
• Income replacement: $110,000 x 5 years (to give additional support to his partner)

The best policy for Tarik is a 10 or 15-year policy with $500,000 to $750,000 in coverage to pay off his debts and give a little boost to his partner on top of their retirement savings. Tarik might consider a permanent policy if he has estate planning concerns or wants to ensure that his partner gets a payout whenever Tarik passes away.

Example #3: Business owner with employees and business debt? Higher, layered coverage

Amira is 52 years old and owns a small incorporated bakery with six employees. This is her primary source of income and the bakery relies on her day-to-day oversight.

• Family status: Married with an adult child who is financially independent
• Employment: Incorporated business owner, $120,000 per year
• Financial needs: $180,000 left on equipment financing, $60,000 business credit line, ongoing lease and operating costs
• Income replacement: $120,000 x 7 years (to give the spouse stability or time to wind down the business)

The best policy for Amira is a 10-year policy with $2M in coverage to cover personal and business needs. Part of the payout could replace Amira’s income and cover business operating costs, while the rest could repay business debt or fund a buy-sell deal if the bakery is sold.

“To keep premiums low and still get meaningful protection, buy the amount of coverage your family would truly need for things like the mortgage, education, and living costs.”— Jeremy Burbano, Life Insurance Advisor

FAQs: Self-employed life insurance