- What is Self Employed Disability Insurance? - Photo by cribbe
Self employed workers don't benefit from employer plans that can help them protect their income in the event of illness or accident. It may be worth looking at private disability insurance plans that can cover self employment as an alternative. How does this coverage work and who needs it?
What is Disability Insurance for the Self Employed?
This kind of coverage is designed to replace a percentage of income (usually up to around 60%) in the event that an individual is unable to work through illness or accident. A qualified claim may see the insurance company make income replacement payments which can be useful if the individual is unable to earn for a period of time. Many employers will offer some form of plan to employees but the self employed may need to buy their own policies. These can be set up to give short term or long term coverage.
What is the Difference Between Short Term and Long Term Disability Insurance?
The primary difference between these two options is the term that a plan will use for payments. Short term disability insurance is meant to give coverage for shorter periods of time. This may cover anything from a few months to a couple of years, depending on the policy provider. Long term plans can be set up to last for a number of years or even until the individual retires.
Do Self Employed Workers Need Disability Insurance?
Different individuals may have differing views on whether disability insurance for the self employed is needed. Some view this coverage as essential; others feel that it is unnecessary. It is worth considering what would happen if an individual became unable to work through illness or accident. This could leave some in serious financial difficulties if they lost the capacity to earn and had no savings to fall back on or other options to use.
Keep in mind that alternative solutions may not suit every individual, illness and accident. Social Security benefits, for example, can take an extremely long time to process and may only be given to those with significant problems. Workers' compensation may only help if the individual is able to purchase their own coverage and, even then, this will only deal with job-related problems. Disability insurance may be the most effective way for many self employed workers to protect their income.
Things to Consider Before Buying Self Employed Disability Insurance
Buying disability insurance for self employment may not be as easy as buying an "off the shelf" policy. Qualifying for coverage and the terms given if accepted may depend on the individual's job and the length of time that they have worked for themselves.
As with any kind of insurance it is worth checking out the terms of disability coverage carefully to ensure that it gives the best benefits possible. Most plans will come with a waiting period before payments will be made. Extending this period could reduce premium costs; shortening it could drive them up.
Those interested in learning more about disability insurance in general may find the following articles useful:
- A Guide to Disability Insurance: Does Coverage Replace Income?
- Short Term vs Long Term Disability Insurance & Income Replacement
- Disability Insurance: Do Workers Need to Buy Individual Coverage?
- Supplemental Disability Insurance: Why Add to Group Coverage?
Source: Finweb
Carol Finch - Carol Finch is the Topic Editor for Retirement Planning, E-Commerce & Technical/Business Writing on Suite101.
