When you leave a traditional employer to start your own business, you are taking an exciting risk. Part of that risk is that you’re walking away from employer-provided benefits such as health insurance, retirement plans, and life insurance. A home-based business owner doesn’t have a team of trained human resources staff to make these decisions, so you need to be educated about a variety of products that some people never have to buy for themselves.
You can easily postpone these decisions, but that delay leaves your family at risk. Educating yourself is a much wiser choice. All life insurance policies pay benefits to your family when a tragedy takes place. Your family members need cash to cover burial expenses and to help them survive until they find a way to replace your income. Even in two-income families, losing one partner’s income can be catastrophic, especially if the surviving spouse needs to cover daycare expenses and hire household help to manage alone.
The biggest topic to understand is the difference between a whole life policy and term life insurance. Term coverage gets paid monthly or annually like your car insurance. You can cancel the policy at any time, but if you make that cancellation, you will get nothing back. A whole life policy is more expensive, but it builds a cash value that you can withdraw or borrow against. Learn to pick the right life insurance policy by taking a simple quiz from Health IQ to test your understanding of life insurance and to help fill any gaps in your knowledge.