While not offered in the traditional sense through an employer, self-employed individuals have several types of insurance policies available to them. People who are self-employed often benefit the most from having insurance policies.
One type of insurance that is available and should be considered is disability insurance. If a self-employed individual has to work because of injury, or sickness, disability insurance helps to provide some income and security for the business owner.
Disability insurance is an extremely important insurance purchase, especially for anyone that is self-employed, but the vast majority of people ignore it, avoid this mistake at all costs. If you were suddenly unable to work because of a disability, what would happen to your business? Would you still be able to pay your own bills? What about the bills for your business?
You’ve worked hard to start your own business. Don’t let a disability destroy all of your hard work and all the hours you’ve put into your business.
Types of Disability Insurance Policies
There are two types of disability insurance policies.
Short Term Disability Insurance Policy
The first is for short-term disability which is a term of two to five years. This type of disability insurance is suitable for those who know that they will need to be out of work, perhaps for a scheduled surgery, for cancer treatment, or for the birth of a child.
Long Term Disability Insurance Policy
The second type of disability insurance policy is long term disability. This kind of policy is more of a “what if” policy. If something should happen that would cause a self-employed person to be out of work, the disability coverage would be in place.
It also covers a long-term disability period, someone who might be out of work for years. This policy can be purchased for a specified number of years or until retirement age.
If the worst happened tomorrow would you be satisfied with your financial planning?. If something were to put you out of work for several months or years, would you and your family be able to survive without the income?
Yes, life insurance is an extremely important purchase, but statistics say that you’re much more likely to end up with a disability than to die prematurely. The importance of life insurance is widely known, but few people understand just how important disability insurance is.
It is important to note that there are almost no disability insurance policies available that cover 100% of the individuals salary.
The top life insurance companies cover the maximum of 50% to 60% of the salary. 50% or 60% doesn’t sound like a lot, and more than likely you may have to dip into savings, but you should take note that these benefits are tax-free.
So while disability insurance is beneficial to have, self-employed individuals need to have savings, additional insurance, and investments to help with the remaining lost wages.
Criteria for Selecting
There are many criteria for selecting an insurance policy and being selected as a candidate for disability insurance. Some things to consider:
- Waiting Period – All policies have a waiting period before benefits will be paid. Should one need disability insurance quickly, the premium will be higher. The shorter the waiting period, the higher the premium. The longer the waiting period is the lower the premium for that area will be.
- Premiums – Premiums are going to be based on the factors already discussed. These being if it is a short term or long term policy. Long term policies cost more as there is more of a chance for a long term pay out. Secondly, the waiting period. As mentioned this will help determine how much the premium will be.
- Occupational Class – When one works in a high-risk occupational class it is slightly harder to obtain disability insurance. Even if you have a high-risk occupation coverage is possible, but you will pay more in monthly premiums. However, security outweighs the higher price any day. Proof of working records and salary/income need to be verified for a three year period. Only after a person is determined to not be able to perform the job duties required, will they be considered disabled.
- Guaranteed policy – Individuals want to select a policy that is guaranteed, meaning it is automatically renewed as long as the premiums are paid. Benefits have to remain the same and must be paid if one becomes disabled. Beware of non-guaranteed policies as the rates and benefits can be changed at any time.There are countless stories of workers with a non-guaranteed policy that lost coverage and then ended up with devastating injuries.What you need to Know before you purchase a disability insurance policy, there are a couple things that you should know. As we mentioned earlier, the biggest thing that you should know is how much of your salary you’ll receive, because you want to get enough money to live off of. Another factor that you should be aware of is any exemptions that your policy may hold. Some long-term policies will pay out after the waiting period as long as you are disabled and can’t preform your job. Regardless of what the disability is, if you can’t do your normal job, you’ll be able to get the policy benefits. Some insurance plans aren’t that simple.Some policies will only pay out if you can’t work at all. If you can still work at any job, then you aren’t going to be paid. It’s important to make the distinction between the two types of plans, it could have a drastic impact on your future.There are countless stories of workers with a non-guaranteed policy that lost coverage and then ended up with devastating injuries.
It is important to shop around, perhaps with an agent or financial adviser, for the best policy available. Finding the perfect rates by comparing several different companies that offer disability insurance. There are dozens of companies that offer unique rating systems, premium structures and guidelines which leads to widely different quotes. Consider the factors listed above to get the lowest premiums for the most coverage.
Please ask us about disability insurance, business insurance, or traditional life insurance, and our agents are standing by ready to provide you with the correct answers. It’s important that you and your family have the insurance protection they need.
Getting a disability insurance policy can be confusing. There are so many different factors to consider. It can be a burdensome process, especially if you’re self-employed, but it’s a purchase that you need to make. Don’t worry, you don’t have to go on that process alone, our agents will love to point you in the right direction to ensure that you get the disability coverage that you need.