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Why should a self-employed person take out life insurance?

Life insurance helps you to ensure that your family will manage financially in the worst-case scenario.

As a self-employed person, you have an effect on many people’s lives. The death of a self-employed person may result in tricky financial issues for the deceased person’s immediate family. Life insurance for companies is an insurance against death that secures the life of your loved ones in the worst-case scenario. 

Individual life insurance for company employee is a voluntary life insurance for self-employed persons, company employees and key persons who are aged 18–68 and live permanently in Finland.

– Individual life insurance for company employee may be taken out either as single or joint cover. You can select it with either fixed or decreasing cover. The agreed amount of compensation is paid to the beneficiaries if the insured person dies during the validity of the insurance, says Insurance Manager Sirkku Hiekkamäki.

Life insurance can also be taken out as a group policy. Then, the insurance cover includes all employees or an employee group. In that case, there are at least five insured persons.

Why does self-employed person’s life insurance feel like a distant idea?

There can be many reasons why life insurance is missing. One of the most common ones is that the self-employed person does not think that having insurance is relevant at the time.

Some self-employed persons say that the thought of their own death or its effects on their family or company has never occurred to them. In some cases, the self-employed person does not know what life insurance even means.

And even if the self-employed person takes their family into consideration, they may forget about their company. It is a good idea to take a life insurance policy into account in partnership agreements to protect the company’s future in case something unfortunate happens to a partner.

Do you know what will happen to your business if one partner dies? It is sensible to discuss such an eventuality ahead of time when drawing up the partnership agreement. One option is to use the life insurance policy to ensure the company’s ability to buy out the deceased partner’s share of the company.

On what basis is the price of the insurance determined?

The price of a self-employed person’s life insurance is determined by the insured party’s age, gender and year of birth as well as the selected amount of compensation. The price also depends on whether the policy is an individual policy or a group life insurance policy and whether the cover is an individual cover or a joint cover. Another factor affecting the price is whether the amount of compensation is fixed or decreasing.

Usually, the insurance premiums for life insurance policies and disability insurance policies are deductible expenses for companies.

– However, if the beneficiary of the life insurance policy is a company, the premiums only count as deductible expenses if the company is a limited liability company.

Selection of a beneficiary depends on life situation

One of the most common questions concerning life insurance concerns the beneficiary.

– If the policyholder dies during the validity of the life insurance policy, the amount of compensation valid at the time of death will be paid to the specified beneficiaries. The compensation will be paid regardless of whether the death was caused by illness or an accident.

The policyholder specifies the beneficiary of the insurance compensation. However, this right may also be granted to the insured persons. Often, the insured person wants to name, for example, their close relatives as beneficiaries, but the beneficiary can also be a company.

Close relatives pay inheritance tax on the amount of compensation. For persons other than close relatives, all compensation paid is capital income. A death benefit paid to the company is considered taxable business income.

7 questions regarding life insurance for companies 

OP Life Assurance Company’s Senior Specialist Pietari Kauste answers general questions about life insurance. 

Nobody wants to think about the fact that their journey will come to an end. That’s why many of us think that life insurance is not relevant. But, sometimes, bad things happen. Life insurance secures the future and life of close relatives in case of a nasty surprise.

The self-employed person may also want to protect the other owners of the company in case the company is jointly owned and the insured person’s family members are not interested in continuing with the business.

For a self-employed person, it provides a way of securing the payment of debts. Life insurance can also be used to prepare for the death of the company’s key employee, which may result in a suspension of activities and reduced income flow.

If life insurance is an employee benefit and the beneficiaries are the insured person’s family members, it is often a good way to improve commitment and motivation. 

Self-employed persons, especially young ones, often do not think about death. Even so, traffic accidents, for instance, unfortunately happen a great deal. A self-employed person should have the courage to discuss the eventuality to find out what will happen and who will be affected should they die.

It is good to keep in mind that, usually, the younger the self-employed person, the greater is the amount of debt.

People die, regardless of their job or industry. In the case of key employees, especially; it is a good idea to consider what will happen to the business if a key employee passes away.
This is a common misconception. Usually, the statutory cover provided by society is too small compared to the need. Finns often have a false sense of security, thinking that everything will be OK, no matter what. Not all of the consequences of a self-employed person’s death are known very well.

The process is very similar. In that case, the employees’ families are the beneficiaries. When it comes to taking out life insurance, there are differences between the different sectors.

The most important factor affecting the decision to take out a life insurance policy is how well the company understands the significance of the different employee benefits for their employees.

Often, the decision is triggered by an unfortunate event that happens to someone you know or by an insurance company salesperson bringing up the subject. Otherwise, the matter doesn’t receive the attention it deserves, unfortunately.
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Benefit for a new entrepreneur -50 %
Life Insurance for Entrepreneurs and Personnel
Ensure the continuity of your business and reduce financial risks related to your personnel.
The insurance is issued by OP Life Assurance Company Ltd, and Pohjola Insurance Ltd acts as its agent.