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Why the Self-Employed Need Disability Insurance

By Jack Wolstenholm on June 9, 2020

This article is written by our friends at Breeze, who make it easy to buy long term disability insurance online.

For business owners, freelancers, and gig workers alike, the financial protection provided by disability insurance is simply a must-have. Disability insurance secures your greatest asset—the ability to keep earning the income you rely on—against the risk of injuries and illnesses. Without it, the negative financial impact of an unexpected disability can sink your business.

Still, the need for disability insurance is often overlooked due to:

  • Misconceptions about how it works and the chances of becoming disabled.

  • An archaic buying experience that is time-consuming and confusing.

It’s time to set the record straight on disability insurance for the self-employed.

How Disability Insurance Works

Putting a disability insurance plan in place protects your source of income from injuries and illnesses. If you become too sick or hurt to work for an extended period of time, disability insurance can replace a portion of your monthly earnings while you get back on your feet. The benefit amount you receive is treated as tax-free income that you can use to pay bills, buy groceries—whatever you need to maintain your lifestyle.

There are two main types of disability insurance:

Long term disability insurance
Covers serious conditions lasting longer than three months (including permanent conditions), from cancer and heart disease to arthritis and back pain. Benefits typically kick in 90 days after a disability occurs and lasts five years.

Short term disability insurance
Covers temporary injuries and illnesses lasting less than three months that people generally recover from, such as a broken wrist or maternity leave for pregnancy. Benefits typically kick in 14 days after a disability occurs and lasts three months.

Both types of coverage can be obtained individually and as part of a group, such as an employer-sponsored plan. But for self-employed workers, employer-sponsored group coverage is out of the question. This makes owning an individual disability insurance policy all the more important.

Now that you have a better understanding of how disability insurance works, the question becomes: Do you actually need it?

The Facts About Disabilities

Disability insurance is often brushed aside because you don’t think you’ll ever need to use it. This couldn’t be further from the truth. Just take a look at the following statistics about the likelihood of disabilities and their financial impact:

  • According to the Social Security Administration, 25% of today’s 20-year-olds will experience a disability that prevents them from working for at least one year before reaching normal retirement age. It truly can happen to you.

  • Life Happens found that 70% of working Americans couldn’t make it one month without a paycheck before experiencing financial hardship. Every emergency fund will run out sooner or later.

  • The Council for Disability Awareness reports that 90% of long-term disabilities result from illnesses, as opposed to injuries from accidents. Although freak accidents do happen, serious medical conditions are the most likely to keep you out of work.

The chances of a disabling event happening to you may be much higher than you think. The negative financial consequences it can have on you and your business cannot be ignored, either. Together, these findings underscore the need for a personalized, individual disability insurance plan to protect what you earn throughout your career.

Budgeting for Disability Insurance

You can typically expect to spend between 1 percent and 4 percent of your annual income on disability insurance coverage. Another rule of thumb is that you should expect to pay between 2 percent and 6 percent of your policy’s monthly benefit amount in premium. Of course, it is possible that you pay more or less than these ranges based on your risk profile.

The cost of disability insurance for self-employed workers depends on a number of policy choices, such as your benefit amount and waiting period length, and personal factors, such as your health history and job occupation. Generally speaking, the younger and healthier you are, the lower your monthly premiums will be. That’s why it’s smart to put a plan in place early on in your career to lock in the most affordable rate possible. You can always increase your coverage later.

To calculate your coverage needs, take inventory of your monthly obligations, necessities, and investing activities. Obligations include payments on your mortgage/rent, student loans, credit cards, and any other monthly debt obligations. Necessities include utilities, groceries, gas, and any other recurring expenses for you and your dependents.

Buying Disability Insurance Online

Confusing paperwork. Pushy sales agents. Weeks of waiting. In the past, disability insurance has been plagued by an archaic process that left much to be desired.

Fortunately, Breeze is changing that. As the first fully-online disability insurance agency, Breeze is dedicated to making affordable coverage more accessible. This means redesigning long term disability insurance for the modern workforce by building a quick, convenient, and educational consumer experience. Here’s what makes Breeze different:

  • Simple online process: Get a personalized disability insurance quote and apply online in just 10-15 minutes.

  • First-class customer support: No commissioned sales agents, just a team of income protection experts that are here to answer your questions.

  • Affordable coverage options: Individual long term disability insurance plans start as low as $9 per month.

Just like any other type of insurance, disability insurance requires you to be proactive now, rather than reactive when it’s too late. That’s why Breeze is dedicated to helping American workers protect their hard-earned income in an efficient, transparent manner.

As an independent professional, the buck stops with you. Take some time to assess your disability insurance needs and protect your earning power today.

Note: This post is for informational purposes only. Connect with an insurance professional before making any coverage decisions.


This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein.

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