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The Time Bomb Waiting in the Gig Economy

Protecting your family from gig economy risks means more than just making enough money.

Don’t get me wrong, I love my life as a freelancer and self-employed contractor. I’ve traded a 60+ hours per week job as an investment analyst and economist for greater flexibility and control over my financial future.

I’m not alone. A study by McKinsey estimates that a third of the U.S. labor force, roughly 68 million Americans, are now part of the gig economy. These part-time, contractor and freelance workers report a better work-life balance, less work stress, and better pay compared to their full-time counterparts.

But are we trading all these benefits for one greater disadvantage?

Most freelancers underestimate the value in the benefits paid out to full-time workers including life insurance, disability insurance and other employee benefit programs. That means, when making the transition to a gig worker, most forget or avoid the costs of these programs, and many end up without the coverage they need.

life insurance for freelancersThat same study found gig workers are seriously at-risk of a health or financial emergency.

  • 75% do not have medical coverage
  • 87% do not have life insurance
  • 86% are not covered by disability insurance

It feels great having this sense of control over my own work, to know that I’m growing my business and am able to make as much as I can to support my family.

But what if there is something else? What if that sense of control is also a false sense of security that could crumble away very quickly?

My wife is in her final semester of nursing school. We’ve been good about saving money for retirement and I’d like to think that if something were to happen to me, she would be able to support our family even without life insurance.

Am I fooling myself?

The truth is, for myself and many in the gig economy, a death of the primary wage-earner could be devastating for the rest of the family.

Life Insurance For the Gig Economy

Seeing how your family would be affected without your income and how to protect them starts with understanding your financial goals and how much they will cost.

This doesn’t mean just working through living expenses and how they’ll be covered but other expenses like education costs and retirement savings.

  • The College Board reports the cost for each year of public university for an in-state student is $25,290 including tuition, room & board
  • Creating just $22,000 in annual income, enough for about $36,000 annually with social security, means having a retirement portfolio of approximately $550,000

Assumptions: 4% withdrawal rate from the retirement portfolio and a social security benefit of $1,360/month (based on the average monthly Social Security benefit for January 2017, which changes monthly), assuming a 15% income tax rate and annualized.

Being ready for these expenses even if the unthinkable happens means planning ahead. This can include creating a budget that plans for necessities, six months of expenses for emergencies, and planning ahead for retirement.

But all of those things require you to actively put aside money on an ongoing basis for your family’s needs. What if something happens to you and you’re not able to keep funding those accounts? This is why you may also want to consider purchasing life insurance.

Term life insurance policies are generally for coverage durations of 10, 15, 20, or 30 years, and if you were to pass away during the term of your coverage that you choose when purchasing your policy, the death benefit of your policy would go to the beneficiary you designated – often tax free.

Permanent life insurance coverage lasts a lifetime and accrues cash value over time. The premiums on a permanent policy are usually upwards of 15 times the monthly amount of a term policy.

If you have people in your life who are financially dependent on you – a spouse or children for example – you probably need life insurance.

The standard rule of thumb is having coverage 5 to 10 times your annual income – this could help to cover your funeral, as well as provide relief to your loved ones to help pay day-to-day expenses, your mortgage, or co-signed debts you may have. But protecting your family isn’t just about replacing income.

I knew once I became a member of the gig economy, I needed to get life insurance to ensure my family was protected. So I partnered with online life insurance agency Haven Life to determine what was best for my family.

Protecting Your Family from these Gig Economy Risks

Nobody likes to think about their own mortality. I understand that, but not having life insurance could be putting your family’s well-being at risk.

For people that have fully embraced the potential created in the online revolution, Haven Life is a natural fit because it’s online and provides coverage not available through an employer since you are your own boss. Haven Life is wholly-owned by MassMutual (rated A++ from A.M. Best*) and offers a simple and convenient process to apply for a policy that enables customers to get an instant coverage decision online.

The Haven Term life insurance policy is available in 10, 15, 20 or 30 year terms. Applicants ages 18-59 can apply for  up to $2 million in term life insurance, and those aged 60-64 can apply for up to $1,000,000 in coverage; subject to underwriting approval.

Haven Life’s simple tools will help you figure out how much coverage you need to protect your loved ones by answering a few simple questions about you and your family. Using the life insurance calculator took less than a minute, recommending that based on my age (41), gender (male), and health (excellent), we need a 30-year policy with $750,000 in coverage to protect my wife and two kids.

That estimate of my monthly premium is based on differences in health. I put my health as ‘excellent’ because I exercise regularly and watch what I eat but even someone with ‘good’ health was only looking at an estimated premium of $110 per month. However, younger applicants or those seeking different coverage amounts/term lengths can see lower monthly payments.

For example, a healthy 35-year old male can purchase a 20 year, $500,000 Haven Term policy, issued by MassMutual, starting at about $21 per month.

Basically, we’re looking at being able to protect the family from loss of my income for about 1% of our annual income. You can find out what your own rate would be by using Haven Life’s easy quote tool. Not bad for that peace of mind.

With all the benefits and advantages of the new gig economy, there are also a lot of risks that don’t get nearly as much attention. Being ignorant of these risks, or worse still avoiding them, is going to leave a lot of freelancers worse off than their full-time counterparts. You can hope that it doesn’t happen to you, gamble on your financial future after all you’ve done to secure it, but it really doesn’t take as much as you might think to protect yourself and your family. Here’s where you can Apply for term life insurance through Haven Life.

Haven Term is a Term Life Insurance Policy (ICC15DTC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111 and offered exclusively through Haven Life Insurance Agency, LLC. Not all riders are available in all states. Our Agency license number in California is 0K71922 and in Arkansas, 100139527.

*MassMutual and its subsidiaries C.M. Life Insurance Company and MML Bay State Life Insurance Company are rated by A.M. Best Company as A++ (Superior; Top category of 15). The rating is as of May 1, 2018 and is subject to change. MassMutual has received different ratings from other rating agencies.

This post was sponsored by Haven Life Insurance Agency, LLC (Haven Life). All opinions are my own.

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