disability insurance for self-employedMore and more Americans are self-employed. While they don’t receive a traditional paycheck from an employer, many of them still rely on a regular flow of income. If the money stops, the bills pile up, and the situation can get dire fast. The business they worked so hard to build may also suffer.

Self-Employment Is on the Rise

Whether they’re entrepreneurs who started a sole proprietorship, business owners with their own employees, freelancers who like the flexibility of working for themselves, or people who turned to gig work as a quick way to make money, an increasingly large number of people now consider themselves to be self-employed.

The IRS received more than 27 million returns from nonfarm sole proprietorships in 2018.

That number may have gotten a recent boost from the pandemic, too. Many workers lost their jobs during the shutdowns, and some of those workers turned to freelancing to make ends meet.

According to Upwork, 59 million Americans have been freelancing during the pandemic. That’s 36% of the U.S. workforce, or slightly more than one in three workers. Many of these freelancers are professionals: 36% of independent professionals freelance on a full-time basis.

The Risk of Disability Is High

As a disability insurance agent, you know that good health doesn’t last forever. Use our stat pack to education your client. They’ll probably be surprised to learn that a 20-year-old has a more than one-in-four chance of becoming disabled before reaching retirement age.

Even if your clients work in sedentary jobs, they are still at risk of having a disability. Some conditions are physical, but others are mental. Some are caused by illnesses, but others are the result of injuries. According to the Council for Disability Awareness, the five leading causes of long-term disability are musculoskeletal disorders, cancer, pregnancy, mental health issues and injuries.

The risk of some types of disability increases with age. However, many types of disabilities can strike young workers in the prime of their lives. Regardless of the person’s age and current health, disability is always a looming threat.

And when disability occurs, it affects more than a person’s health …

The Financial Consequences of Disability Can Be Devastating

When a disability strikes, it can hit a person’s finances twice to deliver a devastating financial blow.

First, the medical bills that come from diagnosing and treating the disability can add up fast. Even with health insurance, a major illness or injury will often involve many out-of-pocket expenses.

Second, the lost work means your client won’t be bringing in an income. This is especially devastating when you’re self-employed and don’t have sick time or vacation days to fall back on.

Many Americans lack the savings needed to survive without a steady income. CareerBuilder says that 78% of Americans live paycheck to paycheck, while three out of four workers have debt. Some traditional employees have paid time off, but self-employed workers don’t have this benefit. When they stop working, they stop earning – but housing and food costs don’t stop.

Either one of these issues could be challenging on their own. Combined, they’re devastating. Disability insurance helps by providing an income when you can’t work because of an illness or injury.

Freelancers Have to Look out for Themselves

Traditional employees often have access to insurance coverage through their jobs. This can include health insurance, life insurance, vision and dental coverage, as well as different types of disability insurance, including both short-term disability insurance and long-term disability insurance. Employers know how important disability insurance is, so this is a common benefit option.

Self-employed workers don’t have this option. Just as they have to secure health insurance on their own, they’re also on their own when it comes to purchasing disability insurance coverage.

And if they think they could rely on Social Security disability benefits, they might be falling for some common Social Security myths. The reality is that Social Security only covers total disability that’s expected to last for at least a year. Many people who apply don’t qualify, and those who do often have to wait a long time. It can take the Social Security Administration three to five months to process an initial application, and if they need to go through an appeal process – as many applicants do – it can take much longer. Only about one-third of applicants ever receive any money.

And if they DO qualify for Social Security disability benefits, the average monthly benefit for disabled workers was $1,277 as of December 31, 2020.

Self-Employed Workers Also Have to Look out for Their Businesses

Self-employed workers include business owners who have additional disability insurance needs.

  • If they stop working, will their business be able to survive? Business overhead expense coverage can help.
  • Do they have business loans? If so, business loan disability insurance coverage might be a smart investment.
  • Do they have employees? They need disability insurance coverage, too.

Protect Your Self-Employed Clients with Disability Insurance

Self-employed workers are enterprising, resourceful and independent. They know that they only get out what they put in.

Unfortunately, some self-employed workers are so focused on building their business that they forget to think about the future. They assume that they’ll always be able to work as hard as they currently do, and they don’t create a backup plan in case an injury or illness makes that impossible.

Disability insurance can be that backup plan.

As an agent, it’s up to you to educate your self-employed clients on the importance of independent disability insurance.

There’s a lot of variation among self-employed workers, both in terms of coverage needs and budgets. It’s up to you to help your self-employed clients find the right disability insurance coverage options from the best disability insurance company.

  • Find the right amount of coverage. Some self-employed workers may need a modest and less expensive policy that only provides coverage for the mortgage. Others may want to purchase more robust disability insurance coverage that offers maximum replacement income.
  • Find the right policy terms. In addition to the amount of coverage, other factors can also impact the premium cost of a policy. Other things to look at include the waiting period or elimination period, the benefit period and definition of disability.
  • Find the right riders. Some self-employed may be interested in various disability insurance riders that provide additional benefits. For example, if they have student loans, they may want a plan that includes a student loan rider. Other riders let policyholders buy additional coverage in the future without additional medical underwriting, waive premiums if they become disabled, and more.
  • Find the right business DI products. In addition to traditional long-term disability or short-term disability coverage, self-employed business owners may also need business overhead expense and bank loan disability insurance coverage. Other products to consider include key person disability insurance and buy-sell disability insurance, as well as group disability insurance coverage for any employees.

If you have a self-employed client, reach out to the DIS sales team. We’ll help you design an ideal package of disability insurance benefits at the right budget for every client.

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