If you’re self-employed, from a plumbing business owner to a wholesale trader, you have a particular vulnerability if you’re out of action for a month or longer due to illness or injury. There are some highly specialised disability insurance plans, available only to the self-employed. How do you decide what makes sense for you? Let’s explore the world of disability insurance for the self-employed and find out what you can do to secure your ability to earn a living from home or otherwise.
Why Do Self-Employed Individuals Need Disability Insurance?
What if you broke a leg? Talk about a crisis of identity! What if the crisis lasted months or years? If you’re self-employed, you won’t have the usual range of employer-provided benefits: no sick leave, no group disability plan. Just you and the ability to earn an income. Sounds a little risky, doesn’t it?
Disability insurance is a paycheck cushion. It makes sure you won’t have to drain your savings account or retirement fund if you become sick or hurt and can no longer work. Put another way, the real question isn’t whether you think you need disability insurance: it’s how on Earth you can ever be sure that you won’t. Need an easy available for almost anyone? Check. Necessary? Check. You’d be hard-pressed to find anything that fits that bill more so than disability insurance. It’s ideally suited to anyone whose livelihood depends on their ability to work.
Key Features to Look for in Disability Insurance Plans
1. Definition of Disability
Own Occupation vs. Any Occupation: An ‘own occupation’ policy covers you if you can no longer do your occupation, while ‘any occupation’ policies are more restrictive; they require that you cannot work in any job reasonably suited to you, based on your training and experience.
2. Benefit Period
For how long will benefits be paid? Generally, your choices will be between a few years and retirement age (or to retirement age if you are already there). If you’re starting to plan for a financially dependent future, what length of time is the equivalent of financial no-man’s-land?
3. Waiting Period
When does it kick in? This is sometimes referred to as the ‘elimination period’. Shorter periods mean higher premiums and quicker payouts. What’s your emergency plan?
4. Coverage Amount
How much percentage of your income will be covered every month? Most plans cover from 50% to 70% of your income. Consider what is important to you – enough coverage or affordable premiums.
Top Disability Insurance Providers for the Self-Employed
OK, enough chit chat. Please allow me to provide some specifics. Here are five disability insurance providers that offer excellent self-employed plans.
1. Guardian
With various levels of coverage available – and some of the most cost-effective coverage around – Guardian excels at offering outstanding own-occupation policies especially for professionals who perform specific types of work.
2. MassMutual
Has the most robust long-term disability at decent prices and offers a cost of living adjustment rider that’s difficult to beat. This is the biggest insurance company on our list, but MassMutual is still a smart bet if a conservative insurance company with lots of options is what you want.
3. Northwestern Mutual
Praise for both its customer service and its ability to customise a disability policy can be found at Northwestern Mutual. Here, its staff can collaborate with you to customise a disability plan that’s suited to your career and lifestyle needs.
4. Ameritas
Offers some of the best ‘own occupation’ policies available and has flexible riders that make it easier to obtain broad coverage without overpaying for it.
How to Choose the Right Plan for You
Selecting a disability insurance policy that’s right for you ultimately rests upon a personal analysis of your profession, lifestyle and financial objectives. When thinking through this decision, the following questions might be helpful: What are the risks that would normally be associated with your profession? Can you afford to pay the premiums for what you want? What timeline of stability do you need?
Final Thoughts
Securing disability insurance may seem like an insurmountable chore, another detail you have to deal with, on top of all the other demands of managing your whole business. But it’s one of those decisions that is likely to heavily influence your financial future, and it deserves a look, a comparison, perhaps even some outside advice from a financial advisor. Better to have it and not use it. Better than not to have it and need it.
After all is said and done, selecting disability insurance is about providing you – and your family – with the peace of mind that tomorrow is as secure as you want it to be today. The sooner you begin your search, the sooner your peace of mind starts. Get started today.
