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Is There Disability Insurance for Self Employed?

People who have employers often have disability benefits provided. When you’re self-employed, you need to get a disability insurance policy for yourself. You can get a policy no matter what you do for work in the many different types of self-employment jobs that are available.

Purchasing a disability insurance policy shouldn’t be optional. It’s not expensive – you can find decent policies that will cost you about as much as a cup of coffee per day.

If you aren’t covered with a disability insurance policy, and you become injured or ill, you won’t be able to earn money. You need disability insurance to provide you with financial protection should you become ill or injured.

A disability insurance policy won’t cover all your income. It will provide a benefit that’s a portion of your income. You make the choice of what percentage of your salary you need a disability insurance policy to cover.



Can Self Employed People Get Disability Insurance?

Typically, an employer provides disability insurance to help cover employee salaries should they become ill or injured. If an employee is injured at work, he or she is covered by Worker’s Comp. If an employee is injured away from work, that’s when disability insurance coverage would be needed.

Yes. Self-employed individuals can get insurance that provides disability benefits.

The rates are affordable. To get a policy, you’ll need to be able to prove records of consistent income. A disability insurance company will want a look at your income taxes.

How Does Disability Insurance Work for Self Employed?

Disability coverage works in much the same way for employed and self-employed individuals.

With disability coverage, a percentage of your earnings will be paid. If you become injured or ill, you’ll have a waiting period – also called a qualifying or elimination period – of at least 30 days before you get any disability insurance payments.

Types of Disability Insurance for Self Employed Workers

You can get short term or long term disability insurance.

A short term policy benefit period typically spans from 90 to 180 days. Long term disability coverage has short term disability insurance “built in” – the short term kicks in for a specific period while long term disability approval is pending.

In other words, short term is the first step in the long term policy. The waiting period for approval for long term disability benefits can be several months before benefits begin.

An insurance company may pay 80% of your salary during the short term period, and 50-60% during the long term period. You are paid in monthly benefits.

You can get coverage from the government through the Social Security Administration or you can get coverage from private disability insurance companies.

Social Security Disability Insurance (SSDI)

You must meet strict guidelines and pay self employment taxes to be approved for social security disability benefits (SSDI) in the social security system. For example, you must have had qualifying employment for a specific period of time. To get SSDI benefits, you must pay social security taxes, also called self employment taxes, and medicare taxes.

If you’ve paid social security taxes, disability analyst will review your case using federal guidelines, to see if you qualify for social security benefits. You must have a disability (injury or illness) which restricts your ability to be employed. The disability must be medically determined and can be physical or mental. You’ll have a medical exam.

SSDI benefits aren’t the same as social security benefits. Can you get social security benefits and SSDI benefits at the same time? No. If that’s the case, Social Security will pay you whichever benefit is the higher amount.

Best Long Term Disability Insurance for Self Employed from Private Companies

1. Mutual of Omaha

Mutual of Omaha is arguably the company with the most experience in providing disability income insurance. Applicants for long term disability insurance will be provided with an on lne Agent Assist. The Agent Assist will help you navigate through calculating your expenses and establishing the length of benefit period you need. There are lots of choices within those to categories. Those choices can help you arrive at an affordable solution.

2. Breeze

Breeze is a breath of fresh air. The insurance company was launched in 2019, Breeze has options geared to the “gig” economy. Individual plans are as low as $9 a month. You can get instant quotes as you apply online.

Breeze policies go through an underwriting process as you determine the type of business you run, your net profit or income, your age and health and other considerations. You can choose disability insurance and add on critical illness insurance. Business overhead insurance policies may help you as a business owner meet monthly business expenses.

3. Illinois Mutual

Illinois Mutual has a disability policy for a self employed worker. The company also has a business expenses policy for small business owners who own their own business.

A standout for Illinois Mutual is the ROP Rider. That’s Return of Premium. When you reach retirement age, you get a 100% ROP, less any benefits received through your disability policy. You also may opt to begin the ROP after you’re had your policy 5 years. After 5 years, you can elect to receive back a portion of your monthly premiums.

4. Northwestern Mutual

Northwestern Mutual helps you calculate how much disability insurance you need to cover a portion of your salary as business income replacement, based on annual income or company profits. You’ll be connected with a financial professional.

The financial representative can help you create a more expansive benefits package. For example, you may be able to bundle long term disability insurance policies with life insurance and other options.

5. Guardian

A Guardian financial representative will help you determine how much coverage you need to get the maximum benefit amount and keep afloat. Although Guardian’s focus is on providing supplemental disability policies to employees who are covered by work issued policies, the company also has a policy for an independent contractor.

For those who own their own businesses with a few employees, Guardian has disability policies for business owner and employees. The premiums can be paid as payroll deductions.

6. Assurity

Assurity helps people with self-employed jobs get disability insurance, and get additional benefits for a catastrophic disability (heart attack, stroke, cancer).

Assurity has very flexible coverage options. For example, you can opt to get a policy which will only allow you to collect benefits which will cover your mortgage and utilities. Through Assurity, you can also get partial disability benefits paid if you return to work part-time.

Best Disability Insurance for Self Employed

Finding the best disability insurance depends on your specific needs, you own occupation definition and your company’s financial strength. You may even be turned down for business loans if you don’t have this type of insurance.

Our best advice? Don’t wait until a disability occurs. Shop now, using the links provided.

How to Apply for Disability Insurance

You will be assessed in a couple ways as you apply for disability insurance. Be ready to provide documentation in support:

  1. Medical Exam – Not always, but may be required depending on the type of work you do and your age.
  2. Income Verification – You’ll need to provide documentation proving your income.
  3. Annual Household Income Replacement – You may elect to receive lesser benefits if you’re in a two-income household. An agent may ask for total household income, including the percentage of your contribution, as part of calculations for how much coverage you need.
  4. Your age and geographic location
  5. The type of work you do

How much is self employed disability insurance?

Disability insurance gets more expensive as you age. Other factors that impact the premium costs are: profession, your health, your age, your income, how soon you want the policy to start, and how long the policy will last.

Here are some round numbers:

  • $23 to $36 a month for $800 coverage.
  • $38 to $63 a month for $1500 coverage.
  • $58 to $96 a month for $2,270 coverage.

How Much Disability Insurance Coverage do You Need?

You need enough coverage to cover your basic expenses.

You would need to cover your living expenses, such as mortgage/rent, utilities, food, which you normally cover with what you earn.

Keep this in mind. According to Social Security Administration data, one out of five people will become disabled between the ages of 20 and 67. Of those, 90 percent of the disabilities will occur due to arthritis, cancer and heart disease.

What are the Requirements for Self Employed Disability Insurance?

You must provide the information required. That will include your age, gender, family medical history, current height and weight, results from blood and/or urine testing. A medical exam may be required.

If you’re a past or current tobacco user, some companies may not issue you a policy. Or, you may expect to pay a much higher premium.

Is disability insurance for self employed tax deductible?

No. The premiums you pay to a disability insurance company are not tax deductible.

But, if you receive benefits, the benefits are tax free.

Although disability insurance premiums don’t add the benefit of being tax deductible, having a policy is essential.

Image: Depositphotos


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