Disability Insurance for the Self-Employed

As a self-employed professional, you likely wear many hats. You're the boss, the employee, and sometimes even the accountant. But what happens if you suddenly can’t work due to illness or injury? For self-employed individuals, disability insurance isn’t just a nice-to-have—it’s essential for protecting your income and sustaining your business during unexpected hardships.

Why Self-Employed Disability Insurance is Crucial

Unlike employees of large companies, the self-employed don’t benefit from employer-sponsored disability insurance plans. If you’re unable to work due to a disability, your income could drop to zero, while your personal and business expenses continue to pile up.

Without the safety net of disability insurance, you risk not only your income but also the savings and investments tied to your business. Here’s why self-employed individuals need disability insurance:

#1 Income Continuity

A disability insurance policy provides a source of income during periods when you’re unable to work. This ensures that you can pay bills, cover personal expenses, and keep your business afloat.

#2 Protecting Your Business

Your business may rely entirely on your efforts. If you can’t perform critical tasks, having coverage can prevent financial strain or closure.

#3 Safeguarding Personal Assets

In many cases, the self-employed mix personal and business finances. Disability insurance can shield your personal assets from being depleted to meet business obligations.

Key Features to Consider in a Disability Insurance Policy

When choosing disability insurance, it’s important to tailor the policy to your unique needs as a self-employed professional. Consider these critical features:

#1 Own-Occupation Coverage

This type of coverage ensures that benefits are paid if you’re unable to perform the specific duties of your occupation, even if you can work in a different capacity. For self-employed individuals, this is invaluable.

#2 Waiting Period

Most policies have a waiting period before benefits begin, typically 90 days. You can opt for a shorter waiting period if you want faster access to funds, though it may increase your premium.

#3 Benefit Period

Decide how long you’d need the policy to pay out. Options range from a few years to coverage lasting until retirement age. Longer benefit periods provide more comprehensive protection but come with higher premiums.

#4 Future Increase Option

As your income grows, you’ll want the ability to increase your coverage without undergoing additional medical underwriting. This feature is particularly useful for younger professionals who expect their earnings to rise over time.

#5 Guaranteed Renewable Policies

Look for policies that guarantee renewal as long as you pay your premiums on time. These policies ensure you won’t lose coverage unexpectedly, giving you peace of mind.

#6 Business Overhead Expense Coverage

This option should be considered for every self-employed physician. Individual disability insurance (IDI) will protect your own income, not your practice. However, business overhead expense, also known as BOE, is a separate disability insurance plan specifically for the self-employed. BOE will reimburse certain business expenses, such as rent, utilities, and employee salaries, if you’re unable to work. It’s a smart choice for self-employed professionals to help ensure your business is still running in the event that you become disabled and are unable to work.