Life insurance for gig economy power earners: what advisors need to know

Image is a cartoon of a man on a motorbike riding through an urban area — Life insurance can be tailored to fit the lives of gig workers.

By Anna Baluch

The U.S. gig economy is made up of roughly 57 million workers, according to the latest data from Deloitte. By 2027, the global accounting firm predicts freelancers and gig workers will become most of the workforce.

Insurance advisors would do well to recognize the growing presence of this demographic and meet the unique needs and goals of clients who are currently involved in the gig economy or plan to join it in the near future.

“Well-designed life insurance policies and properly guided strategies can become very desirable to those with high incomes, income fluctuations, and workers who want more tax-free growth and more tax-efficient planning for capital needs earlier in life,” explained Josh Anderson, president and CEO of Eagle Legacy & Financial.

Why life insurance is crucial for gig clients

Just as anyone else, gig economy power earners need life insurance to replace income that would stop the moment they quit working.

“High-income freelancers do not typically receive a benefits package including life insurance, making a standalone life insurance policy a critical purchase,” said Jake Tamarkin, co-founder and president of Everyday Life Insurance.

Even a basic term life insurance policy is worthwhile, especially for gig workers with loved ones who rely on their income. A policy wouldn’t cost much, but it can do wonders for their peace of mind and their family’s financial security.

Additionally, many gig workers are simply unaware that there are permanent policies that can provide living benefits and tax-free cash liquidity at times they might want or need it most.

“These policies are very appealing because of their flexible premiums, and potential tax strategy, cash liquidity and cash flow leverage opportunities for entrepreneurs and individual investors,” Anderson explained.

Life insurance solutions for those with unpredictable incomes

Term laddering can meet the immediate high coverage life insurance needs of high-income freelancers, while offering lower premiums.

“Instead of purchasing one large policy with a long-term high premium, these clients can stack smaller policies or policy riders with different durations to reduce their overall premium cost,” Tamarkin said.

Permanent policies, such as universal life, are another smart option for gig economy power earners.

“These products let policyholders adjust their premiums to align with ups and downs in their income, plus build cash value they can contribute to long-term financial goals,” Tamarkin explained.

Paying premiums in advance might also make sense for some clients with unpredictable income streams.

“Many life insurance carriers offer options to pay premiums upfront, so when earnings are high, gig workers can pre-pay their life insurance policy in a lump sum,” Tamarkin said.

Additionally, riders, like cash value riders, may be worthwhile.

“These may be appropriate in some cases when gig workers or freelancers need short-term access to cash to pay off debt or meet cash reserve and liquidity needs,” Anderson said.

Ultimately, the right mix of flexibility and protection can help gig workers safeguard their families while adapting to income variability.