Self-employed workers don’t have the same luxuries as salaried employees when it comes to sick days and disability leave. Usually, if you’re not working, you’re not getting paid.
But long-term disability insurance for self-employed workers is often overlooked because they don’t understand how it will benefit them. Long-term disability insurance provides income protection, bringing in money when you can’t work so that you’re able to continue to pay bills and keep your business out of danger.
But that’s just the beginning. Here’s why every self-employed worker should be investing in themselves with long-term disability insurance.
Applying for long-term disability insurance isn’t complicated
Your long-term disability coverage is largely determined by your income. How much coverage you need – how much income you’re replacing – plays a big role in your policy and what you’ll pay for it each month. That means figuring out how much you make; for a self-employed worker, that can be a little more involved than for a salaried employee with a regular paycheck, and you’ll have to find your past two years of tax returns or schedules showing your income.
That might immediately turn some self-employed workers away. But luckily, applicants don’t have to go it alone.
Not sure how much disability coverage you need? Struggling to find tax returns that prove income? That’s okay. Insurance companies will work with you to determine documented or projected income. Independent agents or brokers can help you figure out your coverage needs and what policy is best for you.
Long-term disability insurance is important. Even though self-employed workers may have to do a little more legwork initially to get a policy in place, it’s a simple process when you have others working with you to get you through the financial underwriting. An agent like PolicyGenius can help you determine the necessary documentation so you get an accurate rate for your policy.
Long-term disability insurance is the cornerstone of income protection
When you’re self-employed, if you can’t work you can’t make money. Maybe you’re a freelancer who is relying on contract work, or maybe you’re a small business owner who is one of only two or three people running the company.
Either way, building the same safety net afforded to salaried employees starts with long-term disability insurance. It protects your own income, and can protect your business, too. It’s important to have, and you should make sure it’s affordable.
How can you do that? By looking at the elimination period and the benefit period.
The elimination period, or the waiting period, of a long-term disability policy is how long a policyholder has to wait after becoming disabled before they’ll begin receiving benefits. This is usually somewhere between a month and a year. Choosing a longer elimination period – that is, having to wait longer until you begin to receive benefits – usually results in lower premiums.
The benefit period is how long you’ll receive benefits. The longer the benefit period, the more expensive the policy. The benefit period can last until retirement, but the average disability lasts for three years, meaning that a five year benefit period will cover most people and help make protection affordable.
Short-term disability insurance can also be helpful, but it’s often too expensive for many self-employed workers. It’s usually more economical to have a long-term disability policy for bigger liability scenarios and pair it with an emergency fund to cover your short-term needs.
Partial disability benefits are crucial
On the surface, the circumstances under which a self-employed worker might need long-term disability insurance is obvious: when you can’t work, your policy pays out.
But what if your disability has longer-lasting effects? What if you can go back to work, but your disability prevents you from making the same level of income you did previously?
There’s where a residual disability benefit provision can be helpful to a self-employed worker. If you’re only able to work part time, your policy would help cover some of the missing income from the hours you’re unable to work. This can protect workers while they’re rebuilding their business; if a cancer patient isn’t able to work five days a week during their chemotherapy treatments, they’ll be able to ease back into work and build momentum while still having a safety net in place before they’re back working full time.
One of the most important benefits of long-term disability insurance is peace of mind
Long-term disability insurance provides a lot of financial benefits for self-employed workers. But one of the biggest benefits is one you can’t see: the peace of mind it provides.
The most important thing when you’re disabled is focusing on your recovery. Depending on the ailment, that can be a full-time job on its own. You don’t want to be weighed down by the worries of whether or not your business will be financially okay or how you’ll pay your bills or if you’ll need to rush back to work before you’re healed.
In the end, that’s the real benefit of all types of insurance. You get peace of mind knowing that one setback, whether it’s a disability, a doctor’s visit, a car accident, or something more serious, isn’t financially devastating to you or your family.
And that’s something everyone, whether they’re a salaried employee or a self-employed worker, deserves to have.