Self-Employed Life Insurance: Our Top Picks for Self-Employed Canadians

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:

Term life insurance by PolicyMe

RBC YourTerm by RBC Life Insurance

Solution by the Empire Life Insurance Company

Versatile Term by Co-Operators

Term life insurance by Foresters

"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

Best high-payout life insurance policies for self-employed Canadians

If you’re self-employed and have no access to group life insurance coverage, you may need a higher amount of life insurance coverage than other Canadians. This is especially true for small business owners and those with multiple dependents. Consider a higher coverage amount — up to $1M or more — if: 

• You want your life insurance to cover business expenses in the event of your death
• You want coverage for education costs, extracurriculars, and childcare for multiple dependents
• You have no access to group life insurance benefits through yourself or your spouse
• Your self-employed income is above $100,000 per year

The table below highlights five term life insurance plans with excellent options for those in need of high coverage amounts.

High-payout policies require more underwriting

Because high-coverage life insurance policies represent a greater risk to the insurer, they often come with steeper underwriting requirements, such as a medical exam or a detailed health questionnaire.

PolicyMe offers instant approval for up to $2M in coverage for adults aged 50 and under who pass an initial online health screening. Other insurers may require a medical exam for coverage amounts as low as $1M.

Versatile by the Co-Operators

Solution by the Empire Life Insurance Company

RBC Your Term by RBC Life Insurance

Term life insurance by Desjardins

Term life insurance by PolicyMe

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

Term life insurance is the best choice for most self-employed Canadians with financial obligations like dependents and a mortgage. But what about permanent life insurance—isn’t that a valuable option for financial planning? 

It depends. Term life policies are designed to cover vulnerable periods of a family’s life without draining your finances, which makes them the best fit for self-employed Canadians looking for a safety net to protect against the financial consequences of an unexpected death. If you die unexpectedly within your chosen policy period, the tax-free lump sum payment from a term life insurance policy can help your loved ones: 

• Pay off any outstanding debts, including business debts
• Cover final expenses, including burial costs and medical expenses
• Replace your income to meet ongoing daily needs
• Finance your children’s care and education

By contrast, permanent life insurance policies function as an estate planning tool that can leave a death benefit to your loved ones regardless of when you die. Unlike term life insurance, which has a fixed lump-sum payout, some types of permanent life insurance include a cash value component that builds over time as you make premium payments. These policies charge steep premiums across your lifetime in return for a guaranteed payout years down the road, which makes them a less cost-effective choice for most Canadians, especially self-employed people on a tighter budget.

There are a few self-employed individuals who could benefit from permanent life insurance, though. They include: 

• High-net-worth individuals with complex estate planning needs
• Anyone who’s maxed out traditional retirement savings mechanisms
• Anyone with permanent dependents, such as a disabled child or spouse in need of lifelong financial support 

If those two categories don’t describe you, you’re likely better off with a robust term life policy priced to match your actual needs and budget. 

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Let your life insurance be life insurance

Be wary of financial advisors who push whole life insurance products as an investment opportunity rather than an insurance solution.

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. 

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.

“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

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.

FAQs: Self-employed life insurance