What Is The Best Disability Insurance For The Self-Employed? [Supreme 2022 Guide]

— Last Updated May 27, 2022

What Is The Best Disability Insurance For The Self-Employed? [Supreme 2022 Guide]

In this article

— Last Updated May 27, 2022

Read Time
8 mins
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Reviewed by
Eric Berkman
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What Is The Best Disability Insurance For The Self-Employed? [Supreme 2022 Guide]

Stephanie Wilson

Director of Operations

Read Time

8 mins
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Reviewed by

Eric Berkman

In this article

Navigating disability insurance can be hard enough at the best of times, but self-employment adds another hoop to jump through. In addition, disability insurance can often seem confusing or overwhelming. Luckily, we are here to help guide you through finding the best disability insurance for the self-employed!

In most cases, working with a trusted insurance agent for a quality company like Policy Solver will help personalize insurance to your unique circumstances. Outside of working with an agent, it’s also important to have knowledge about the topic. So, let’s start by answering an essential question: what is disability insurance?

Disability Insurance

Many people think of disabilities as something you are born with or suffer from due to a severe accident. In reality, many disabilities are common and impact quality of life in less obvious ways. Disabilities can also impact your income, which can be disastrous when so many people depend on years of steady income to make enough to retire. That’s where disability insurance comes in!

  • Definition

Disability insurance is a form of income protection that insures your income against the risk of a disability that makes it harder or impossible to complete your job. If you depend on your paycheck, a sudden short or long term disability can leave you in the lurch. With disability insurance, you can get benefits and protected income as you recover.

Individual policies and benefits depend on your particular plan, but disability insurance is typically a huge help either way. The benefits of insurance that you get can be used however you want, from paying medical bills to buying essential groceries. The main point is to guarantee that a disability that makes it impossible to do your job will not severely impact your income.

  • Examples

Many people find themselves confused by what constitutes a disability. In reality, a disability is any condition of your body or your mind that makes it more difficult to accomplish certain tasks. Going by this definition, we can see a variety of conditions that would qualify as a disability for insurance purposes:

  • Arthritis
  • Cancer
  • Depression or anxiety
  • Stroke
  • Diabetes

And more! These conditions are not usually considered a disability, but they can severely impact your ability to work. This is particularly true for more labor intensive jobs, such as working in construction. With disability insurance, you can guarantee that developing a disabling condition like arthritis or mental illness will not take away your steady income.

disability insurance for self employed

  • Advantages

Now that we’ve covered the basic definition, let’s look at the pros and cons of disability insurance. We’ll start with the advantages!

  1. A flexible plan means greater coverage. Depending on your occupation, you can look at the potential disabilities that would make it hardest to return to work. You can also look at the conditions that are most likely to develop. Many plans are flexible, so these conditions are likely to be covered by disability insurance.
  2. It allows you to focus on recovery. A new injury or condition should leave you focused on recovering and getting well. With disability insurance, you won’t have to stress about making ends meet or losing your savings. Just focus on your health!
  3. Benefits are typically tax-exempt. That’s right! As long as you have paid your premiums (monthly fees), your disability insurance benefits will be tax-free and ready to be spent! Every penny can go towards the important things.
  • Disadvantages

Of course, there are certain disadvantages that you should be aware of. They may keep you from choosing to utilize disability insurance.

  1. You may not ever need it. Like most plans, disability insurance is supposed to protect in the event of an injury or condition. But you are not guaranteed to develop a disability that prevents you from doing your job, so there is the potential to pay for insurance you will never need.
  2. There is often a waiting period. Many disability insurance plans will have a period of time between the diagnosis of your disability and the time when you can begin receiving benefits. These can vary based on whether you have short or long term disability insurance as well as the outline of your specific plan. 
  3. The entire process can be complicated. Some people might get discouraged by the time it takes to get disability insurance. Some plans may require a medical exam to get coverage, and others may have stacks of paperwork and documentation needed. The complicated process is why many recommend (and even enforce) the need to work with an agent.

Now that we’ve covered disability insurance and the various pros and cons, it is time to move on to the second focus. How does disability insurance for the self-employed work? Doesn’t insurance depend on your job? We will answer the question of what insurance for the self-employed is in the next section. This will allow us to truly explain disability insurance for the self-employed.

What Is Insurance For the Self-Employed?

It’s true that health insurance often comes from your employer. In fact, many would have a hard time imagining how they would acquire health, disability, and even life insurance without first being employed! However, insurance for self-employed individuals is more straightforward than you might think! There are different kinds of insurances, but know the difference between disability insurance vs workers compensation.

  • Definition

A self-employed person is defined as someone who owns their own business and works for themselves. In terms of insurance, it is often essential since your health and your ability to run your business are intertwined. You may be a sole proprietor or independent contractor, so long as you report self-employment income.

In terms of health insurance, you can purchase an insurance plan as a self-employed individual covering your own employee benefits. Depending on the income from your business, you might qualify for deductions or financial assistance.

  • Examples

Being self-employed means trying to keep a million balls in the air at once. It can be easy to let health insurance slip through the cracks, but you should do your best not to. Being the boss and employee all at once means that a health issue can spell disaster for your business.

Look for plans on the Health Insurance Marketplace during the open enrollment period (November 1st to December 15th) to find a general plan that works for you. You can also potentially deduct the cost of paying for your health insurance from your overall taxes as a business expense!

In short, insurance is vital for the self-employed. Now that you know about disability insurance as well as insurance for those who are self-employed, let’s combine the two! That’s right: it’s time to learn about disability insurance for the self-employed!

How Does Disability Insurance For The Self-Employed Work?

Much like other forms of insurance, disability insurance is vital for the self-employed who rely on themselves and their capabilities to earn their income. The way it works is that you will need to decide if you want short term, long term, or a mix of both coverages.

  • Short term coverage is used for temporary injuries that limit your ability to work, but can generally be recovered from.
  • Long term coverage is designed to last potentially for years, covering permanent disabilities and serious injury.

After you decide which kind of coverage you want, you’ll need to decide on your specific plan. This can include your premium, which is the monthly fee you will pay to your insurer to keep your coverage going. You’ll also decide on benefits, which are often meant to give back about 50% to 80% of your regular income.

Different aspects such as your particular career, your age and gender, and your income level will decide the type of plan that you will receive. Your business and self-employment will also be analyzed, particularly factors like how long you’ve been in business, your profits, and how many employees you’ve had.

After these factors have been analyzed, you will have your plan! It is up to you to decide how long you want to keep it and if the premium payments are sustainable. With proper disability insurance, you can be sure that your self-employment will not be jeopardized by illness.

How Much Does Disability Insurance Cost?

As mentioned before, several factors are going to determine how much your disability insurance costs. A general rule of thumb is that disability insurance will cost you anywhere between 1% to 4% of your annual income. The exact percentage depends most heavily on several factors.

  1. Your job. Most insurance companies arrange jobs into groups based on the hazards. Light labor jobs would be working as a mechanic or plumber, while outright labor jobs would include construction and heavy lifting. The more labor-intensive your job is, the higher your insurance will cost.
  2. Personal factors. Your age, gender, and general health conditions will all contribute to the cost. This is all based on how likely you are to need your disability insurance. As you age, it is more likely you can become disabled, and women are found to suffer from job-altering disabilities like cancer and depression more often than men. Finally, you will most likely need a medical exam to determine your overall health. Premiums will be higher if you are more likely to need your insurance soon.
  3. Your own policy choices. Decisions such as the amount of benefits you want, the coverage you need, and any additional terms will all impact the overall cost. Make sure you consider this when it comes to choosing the right policy for you! Some may seem better than others, but try to determine if they are stable enough to keep for the long term.

cost of disability insurance for self employed

Finally, you can expect to pay between 2% and 6% of your monthly benefit amount as your premium fee. When choosing your plan, you will select a monthly benefit amount to receive if you become disabled. The higher the benefits, the higher the premium will be. It takes a bit of calculating, but with these numbers in mind you can see how much disability insurance will cost in no time.

Is Disability Insurance For The Self-Employed Worth It?

Of course, the general question is always going to be whether or not disability insurance for the self-employed is worth it. A trusted insurance agent is going to tell you that disability insurance is absolutely worth it, especially for the self-employed!

Many people do not have the necessary savings or support to provide for themselves if they can no longer work. This goes double for people who are supporting family members. Oftentimes, disability insurance can be just what you need to get back on your feet and keep your business running even when you are ailing.

Self-employed people are hardworking and have often built their business from the ground up. When disability or life-altering injuries occur, your business will be protected thanks to your benefits. While the cost can be daunting, you need to assess how much the premiums and overall cost will impact your life in relation to how much the benefits will impact your life.

If the benefits will improve your life more than the cost harms it, then disability insurance for the self-employed is worth it – without a doubt.

Where Can I find Out More And Get Advice On The Best Disability Insurance For The Self-Employed?

Today, you can find multiple disability insurance consultants on the internet. However, choosing the right advisor is another difficult task. That’s where Policy Solver comes in!

Policy solver has knowledgeable, licensed agents, and is here to help you navigate through your disability insurance journey. We are a team of professional insurance policy brokers and we can save you time and money, while finding the right policy for your specific needs.

Our experienced advisors will ask you a few questions to understand your unique situation and will come up with a comprehensive analysis of different insurance plans so they will be able to recommend the best policy at the best price for you.

So, need advice on disability insurance for self-employed? Contact us or schedule a free consultation, and we will get back to you soon!

 

Sources

Wolstenholm, Jack. “Disability Insurance: What Is It & How Does It Work?” Breeze, 2 June 2019, https://www.meetbreeze.com/disability-insurance/what-is-disability-insurance/.

19, gregory wayne PRINCE June, et al. “6 Advantages of Disability Insurance.” Term Life Insurance, 2 Apr. 2020, https://www.termlife-insurance.com/blog/6-advantages-of-disability-insurance/.

Palmer, Joel. “The Pros & Cons of Disability Insurance, Explained.” Breeze, 25 June 2021, https://www.meetbreeze.com/disability-insurance/pros-and-cons-of-disability-insurance/.

Dore, Kate. “Best Health Insurance for the Self-Employed of 2022.” Investopedia, Investopedia, https://www.investopedia.com/best-health-insurance-for-self-employed-5078989.

Wolstenholm, Jack. “How Much Does Disability Insurance Cost per Month?” Breeze, 8 June 2019, https://www.meetbreeze.com/disability-insurance/how-much-does-disability-insurance-cost/.

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