Being self-employed can be a rewarding and fulfilling career choice, but it also comes with its own set of unique challenges. One of the biggest challenges faced by self-employed individuals is the lack of employer-provided healthcare benefits, including disability insurance. Disability insurance provides income replacement if you become unable to work due to a disability. In this article, we’ll explore why disability insurance can be a must-have for self-employed individuals.
Understanding Disability Insurance
What Is Disability Insurance?
Disability insurance provides income replacement if you become unable to work due to a disability. Disability insurance can cover both short-term and long-term disabilities and can replace a percentage of your income to help you pay your bills and support your family.
There are two primary types of disability insurance: short-term disability insurance and long-term disability insurance. Short-term disability insurance typically covers disabilities that last for a few weeks to a few months and up to two years, while long-term disability insurance covers disabilities that last for several months or several years.
When you purchase disability insurance, you pay a premium to your insurance provider. If you become disabled and are unable to work, you can file a claim with your insurance provider to receive income replacement. The amount of income replacement you receive will depend on the coverage level of your policy and the duration of your disability.
How Self-Employed Individuals Can Benefit From Disability Insurance
Lack of Employer-Provided Benefits
One of the primary reasons why self-employed individuals opt to purchase disability insurance is the lack of employer-provided benefits. When you’re self-employed, you’re responsible for providing your own benefits, including disability insurance. Without disability insurance, you may not have a source of income if you become disabled and are unable to work.
Increased Risk
Some self-employed individuals may also be at an increased risk of disability due to the nature of their work. According to the U.S. Bureau of Labor Statistics, independent workers are an at-risk group due to their unstable employment circumstances, which can lead to “poorer workplace safety and health outcomes.” One way to mitigate this higher risk is to purchase a disability insurance policy.
Financial Protection
Disability insurance provides financial protection in the event of your disability. It can provide income replacement to help you pay your bills and support your family while you are unable to work. This can help alleviate the financial stress that often comes with a major life change.
Business Protection
Disability insurance can also help protect your business in the event of a disability. If you are unable to work due to a disability, your business operations may be impacted as well. Disability insurance can provide income replacement to help you keep your business running while you’re unable to work.
How to Choose the Right Disability Insurance Policy
Determine Your Coverage Needs
The first step in choosing the right disability insurance policy is to determine your coverage needs. Consider how much income you’d need if you were unable to work, and for how long. This can help you choose a policy that provides the coverage you need.
Understand Your Coverage Options
When choosing a disability insurance policy, it’s helpful to understand the coverage options. You may want to look at both short-term and long-term disability policies.
Compare Policies From Multiple Providers
To find the right disability insurance policy, it’s important to compare policies from multiple providers. Look for a policy that provides the coverage you need at a price you can afford. Consider the reputation of the provider and the level of customer service it offers.
Read the Fine Print
Make sure you understand the terms and conditions of the policy, including the definition of disability and the waiting period before benefits start. You should also understand any exclusions or limitations of the policy.
Consider an Independent Insurance Broker
An independent broker can help you navigate the different policy options and find the coverage that meets your specific needs. They can also help you compare policies from multiple providers and find the best price. You may also benefit from their expert advice and guidance, and their assistance may ultimately help save you time and money.
It’s important to research and select the right disability insurance policy based on your individual circumstances and business needs. Consider factors like the waiting period before benefits start, the benefit amount, the duration of coverage, and any policy exclusions. Having disability insurance can make it easier for self-employed individuals to focus on their recovery without worrying about the financial consequences of a disability impacting their ability to earn a living.
Resource Links
U.S. Bureau of Labor Statistics: Fatal Occupational Injuries to Independent Workers
Annuity.org: What Is Disability Insurance for the Self-Employed?
Texas Department of Insurance: What’s Disability Insurance and How Does It Work?
New York Life Insurance: What Does Disability Insurance Cover?
Insurance Information Institute: What Are the Types of Disability Insurance?