Whether you love it or loathe it, striking out as a freelancer means that you have to be your own boss. The upside is easy hours; the downside, not so much. When you’re independent, your own wellbeing and security are in your hands: and not all aspects of your security are easy to see. Consider one small aspect: disability insurance, particularly in the form of private disability insurance. If you’re thinking ‘Wow, I really need that,’ I wouldn’t blame you. Never heard of it? You might be missing out on something life-changing. So what is disability insurance?
Understanding Disability Insurance
Disability insurance is a safety net. If something rendered you unable to work because of illness or injury, disability insurance could replace a portion of your lost income. This is not just a case of getting run over by a tractor; it could also cover problems such as failing eyesight or other health issues that could keep you off work for months – or even years.
How Does Disability Insurance Work?
Suppose you’re a solo worker freelance graphic designer. A bad wrist accident takes you out of work. How would you pay your rent, groceries, or medical bills without a steady paycheck? Enter disability insurance, which provides you income until you can get back on your feet.
Why Is It Crucial for Freelancers?
Because we, as freelancers, don’t have the fallback of sick leave or a company-provided health package that a regular employee does, disability insurance is not just a good idea, it’s a necessity.
No Employer Benefits
While you may be your own boss as a freelancer, unlike a regular employee who has employer-sponsored disability coverage, you are on your own when it comes to your financial future.
Inconsistent Income
Because freelancer income can be very variable from month to month, you might only fantasise about fires – and fail to think about the potential for lean spells because of unexpected illness or injury. Disability insurance smooths over the periods when you’re really unable to work.
Choosing the Right Disability Insurance
It won’t be easy to pick the right policy – this is not about going for the cheapest quote, but it will ensure you have adequate cover. Step-by-step guide to starting:
Short-Term vs. Long-Term Disability Insurance
Short-term policies generally provide coverage up to several months and can start up after an injury with very little notice.
You particularly need long-term policies if you’re coping with any significant health problem that will take you out of the workplace for extended periods of time.
Benefit Amount
Think about how much money you need every month to pay your core outgoings – most policies pay around 60 per cent of your average income.
Waiting Period
The elimination period is the gap in time between an injury or disease and the start of the benefits. The longer your waiting period the lower your premium, of course, the but check payments delayed.
How to Apply for Disability Insurance
1. Estimate your regular expenses and, if possible, how much income you would need to replace if you were unable to work.
2. Think about your biggest personal risk: if you can’t cover it yourself, consider whether you can buy insurance.
3. Are debts likely to exceed your disposable income in any given month? If so, could you re-negotiate your mortgage or credit card agreement to buy some breathing space?
4. Balance your life buckets: look at the small percentage you’ve set aside for the future and ask yourself where it goes.
Shop Around: Freelancers Union provides multiple health insurance plan options and a comparisons tool to help you evaluate your options; look for rankings of insurance plans and insurers by independent sites to find out how other freelancers have rated their coverage.
Caveat Emptor:
1. Just because an item isn’t listed, doesn’t mean it’s not covered.
2. Just because an item is listed, doesn’t mean it’s necessarily covered. Understand the Terms: If the policy’s terms use phrases like ‘subject to resticture’ or ‘unless in contravention’, avoid purchasing.
Conclusion
Freelancers, think about disability insurance not as just another monthly payment for a policy you’ll probably never even see, let alone use. But rather, understand it as a crucial part of the arsenal you need to protect your financial position. Think of yourself as the content provider of your own business. Is there anything more important in the way you derive your income and your worth to yourself and to the world than your ability to work? That’s why insuring your ability to work if something bad happens is so important. It’s a smart investment.
As exciting as the freedom of freelancing might be, it comes with a responsibility towards one’s future that it’s important to honour. If you haven’t yet made a concerted effort to get disability insurance – not just to consider it, but actually find the right solution for you – it’s time to get to it. It’s a smart move, and smart is good.