Best Disability Insurance for Self-Employed People

 As a self-employed individual, you’re likely used to managing your own business, making key decisions, and ensuring that your work is successful. But when it comes to protecting yourself from unexpected events that could leave you unable to work—such as an injury or illness—it can be challenging. Unlike employees who are often covered by employer-provided disability insurance, self-employed people must seek their own coverage. Disability insurance can help protect your income and provide you with financial stability if you are temporarily or permanently unable to work due to an illness or injury.

In this blog, we’ll look at the best disability insurance options for self-employed people, including the types of coverage available, how to choose the right policy, and the top insurance providers to consider.

What Is Disability Insurance?

Disability insurance is a type of insurance that provides income replacement in the event that you are unable to work due to illness, injury, or disability. It is designed to replace a portion of your lost income and help you meet your financial obligations while you’re unable to earn a living.

There are two main types of disability insurance:

1. Short-Term Disability Insurance (STDI): This type of insurance provides coverage for a short period, usually between 3 to 6 months. It covers temporary disabilities that prevent you from working for a limited time. STDI typically pays between 50% and 70% of your pre-disability income.

2. Long-Term Disability Insurance (LTDI): This type of insurance provides coverage for longer periods, from a few years to until you reach retirement age. LTDI generally offers more comprehensive coverage and higher payout amounts but is more expensive than short-term disability insurance.

Why Do Self-Employed People Need Disability Insurance?

As a self-employed individual, you don’t have the luxury of paid sick leave or employer-sponsored disability coverage. Without disability insurance, you may face significant financial hardship if an illness or injury prevents you from working. Disability insurance ensures that you have a safety net to fall back on, protecting both your income and your livelihood.

Here are some key reasons why disability insurance is crucial for self-employed people:

• No Employer Coverage: Employees often have access to disability insurance through their employer. As a self-employed person, you're responsible for your own coverage.

• Income Protection: If you can’t work, your income stops. Disability insurance ensures that you still have funds coming in, even when you're unable to perform your work duties.

• Peace of Mind: Knowing you have coverage in place for an unexpected event can relieve a lot of stress, allowing you to focus on growing your business.

• Financial Stability: Without disability insurance, you might have to deplete your savings, take out loans, or rely on family and friends to get by if you become unable to work.

Key Considerations When Choosing Disability Insurance for the Self-Employed

When shopping for disability insurance, self-employed individuals must carefully consider the following factors:

1. Coverage Amount: The amount of coverage you need depends on your income and monthly expenses. Ideally, your policy should replace 60% to 70% of your pre-disability income, which is the typical replacement amount offered by most policies.

2. Elimination Period: The elimination period is the waiting period before you start receiving benefits. For self-employed individuals, a longer waiting period may be acceptable if you have a financial cushion or savings to cover the gap. Common elimination periods range from 30 days to 180 days.

3. Benefit Period: This is the length of time you will receive benefits if you are disabled. Some policies offer benefits for a set period, such as two years or five years, while others offer benefits until you reach retirement age. Longer benefit periods tend to come with higher premiums.

4. Definition of Disability: Some policies have stricter definitions of disability, requiring you to be unable to perform your own occupation. Others may provide broader coverage, paying out if you are unable to work in any capacity. Make sure you understand the definition of disability in the policy you're considering.

5. Cost of Premiums: Disability insurance premiums can vary widely depending on the coverage amount, elimination period, and benefit period. For self-employed people, it’s important to balance the need for adequate coverage with the affordability of premiums.

6. Policy Riders: Riders are optional additions to your policy that can provide extra benefits. Some common riders for self-employed individuals include:

   • Own Occupation Rider: This ensures that you will receive benefits if you are unable to perform your specific job, even if you can work in another occupation.

   • Cost of Living Adjustment (COLA): This rider adjusts your benefits to keep up with inflation.

   • Residual Disability Rider: If you're partially disabled and can still work but earn less than you did before, this rider can pay you a percentage of the benefit.

Top Disability Insurance Providers for Self-Employed People

Here are some of the best disability insurance companies that offer coverage tailored to self-employed individuals:

1. Owosso Life Insurance Company (LIMRA)

Owosso offers a range of individual disability policies with flexible terms that are great for self-employed individuals. Their policies allow for customization to meet your specific needs, including the option to add riders for extra coverage.

• Pros: Extensive coverage options, customizable plans.

• Cons: Premiums are on the higher end compared to some competitors.

2. The Guardian Life Insurance Company

Guardian is one of the leading disability insurance providers for self-employed individuals. Their policies are highly customizable, offering options for both short-term and long-term disability coverage. Guardian is known for its strong financial ratings and commitment to customer service.

• Pros: Offers “own occupation” coverage, which is beneficial for self-employed professionals.

• Cons: Premiums can be high, especially with added riders.

3. Principal Financial Group

Principal Financial Group offers both short-term and long-term disability insurance with options for self-employed individuals. Their policies are highly customizable, and they have a reputation for offering high-quality service and support.

• Pros: Excellent customer support and claims service, flexible options.

• Cons: Premiums can be on the higher end for more comprehensive coverage.

4. Aflac

Aflac is well-known for offering affordable disability insurance plans for self-employed individuals. Their policies are straightforward and come with easy-to-understand terms. Aflac also provides fast claims processing and a range of additional benefits.

• Pros: Affordable premiums, easy claims process.

• Cons: Limited customization options compared to other providers.

5. MetLife

MetLife offers both short-term and long-term disability insurance that can be tailored to fit the needs of self-employed individuals. Their policies provide broad coverage, and they offer several riders to enhance the basic coverage.

• Pros: Strong financial strength and wide range of coverage options.

• Cons: Some customers report higher premiums for comprehensive plans.

6. MassMutual

MassMutual offers a variety of disability insurance products that are ideal for self-employed individuals. Their policies include the option for an “own occupation” rider, which is crucial for professionals who rely on a specific skill set to earn income.

• Pros: Flexible coverage options, strong financial stability.

• Cons: Premiums may be higher compared to other insurers.

Conclusion

Choosing the best disability insurance for self-employed people involves assessing your needs, understanding the coverage options, and comparing policies from different providers. Disability insurance is an essential financial safety net for self-employed individuals who don’t have employer-sponsored coverage. By selecting the right policy, you can ensure that your income is protected, giving you peace of mind and financial stability if you are ever unable to work due to illness or injury.

Be sure to carefully evaluate factors like premium costs, the definition of disability, and the coverage amount before making a decision. With the right disability insurance policy, you can safeguard your income and continue focusing on growing your business without worrying about unexpected setbacks.