The 6 best disability insurance policies for the self-employed of 2021

Better disability insurance for the self-employed
Insurance company Why we chose it Elimination deadlines
Guardian Best overall 30 to 720 days
Illinois Mutual Best budget 30 to 730 days
Broken Ideal for freelance / Gig 30 to 365 days
Mutual of Omaha Ideal for a short waiting period 0 to 365 days
Assurance Ideal for the high risk professional category 30 to 365 days
North West Mutual Better income replacement did not list


What is the difference between short term and long term disability insurance?

Disability insurance is a protection policy that covers part of your income if you are unable to work for the short or long term. The term “disabled” can have several definitions: perhaps you have an injury, pregnancy or illness that prevents you from working for several weeks or months or you are diagnosed with a chronic illness which means you cannot work. not work for the foreseeable future. Disability insurance covers each of these circumstances (and many more).

Insurance companies sell short and long term disability insurance policies.

Short-term disability: This insurance policy will typically cover up to 70% of your salary based on the policies we have reviewed. The “short term” part indicates that you will probably be able to return to work within six months.

Long term disability insurance will cover part of your salary for up to several years after the onset of your disability. The policies we reviewed typically covered between 40% and 70% of your salary.

Both are options to make sure that you wouldn’t run into financial hardship if you found yourself unable to work for a short or long period of time.

What is disability insurance for the self-employed?

Self-employed people depend on themselves to keep their business running; their effort and work is what drives a business and their pay. If a self-employed person does not work, he does not earn money. In the event of disability, the inability to work for months or years can be a significant financial blow and put their business in jeopardy.

If you haven’t saved enough and find yourself unable to work, disability insurance can provide you with a safety net where you can still receive part of your salary if you can’t work. It’s also called “disability income insurance” because the policy protects your income so that you can ideally pay your bills and keep your business afloat as you get better.

Can you continue on disability if you are self-employed?

Being self-employed does not mean that you are not vulnerable to the illnesses and life injuries that can arise. Therefore, you can purchase and qualify for disability insurance as a self-employed person.

Be aware that this process is often more difficult than if you were employed by a large organization that provides disability benefits to its employees. For example, you may need to prove in the form of tax returns that you have been self-employed for a while. You may also need to show how you arrive at your salary or business expenses to get a policy that will pay out a large enough percentage of your income to be worth it.

How much does disability insurance cost?

The costs of disability insurance have many variables, including:

  • Policy type (short or long term disability)
  • Percentage of income paid
  • Elimination period
  • Policy payment term
  • Person’s income
  • Person’s profession

When an insurance company sells you a short term or long term disability insurance policy, they are essentially taking the risk that you will pay more on the policy than they will pay you if you become disabled. Therefore, self-employed workers with high-risk occupations, higher incomes, or policies that pay a higher percentage of their income can expect to pay higher monthly premiums than those who do not.

How much of your salary will you receive from disability insurance?

The percentage of your salary you will receive depends on the policy you purchase. Disability insurance policies will pay a percentage of your income, which can range from 40% to 70% depending on the policies we reviewed. According to the United States Bureau of Labor Statistics, the median wage replacement rate for a short-term disability policy is 60%.Of course, the higher the percentage paid by the disability insurance policy, the higher your monthly premium is likely to be.

Keep in mind all the expenses affected if you become disabled as a self-employed person. For example, when you own your own business, your home can be your office. Your utility payments, salaries paid to others, taxes, etc. can also be compromised if you couldn’t work. As such, disability insurance is more than just a salary you pay yourself; it’s also about having enough funds to cover your business expenses.

How soon will I receive a disability award?

Most disability insurance policies have what’s called a elimination or waiting period: the period of time you have to wait before your policy starts paying your benefits. Under a traditional employer, an employer often requires that a person use their paid vacation or sick leave before their disability benefits begin. However, as a self-employed person, you may or may not include paid time off in your salary.

It is important to review the elimination periods when choosing a short or long term policy. For short term policies, this can range from a week to six weeks or more. For long-term policies, we’ve seen elimination periods ranging from 30 days to 720 days. The longer the waiting period, the cheaper the policy.

Once the elimination period has passed (and you have completed the necessary paperwork for your disability insurance), you may be eligible for disability benefits. The insurance company will usually pay them to you directly, often in the form of a direct deposit.

How we choose the best disability insurance for the self-employed

To select the best disability insurance for the self-employed, we reviewed over 20 companies that offered both short and long term disability insurance policies. We focused on companies that offered short and long term disability insurance policies to individuals (not just employers) and accepted those from all occupational categories. We took into account ease of application, the availability of pro-freelance terms (like business expense riders and higher policy percentages), and the availability of online quote or education tools. These insurance companies offered policies in at least 45 states so readers had the widest options in terms of coverage, and we looked for an AM Best rating of at least A- to ensure the policies would get paid.

About Antoine L. Cassell

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