As we have pointed out numerous times at Council for Disability Awareness, your ability to earn income is your most valuable asset. We tend to insure our property, but overlook the source that makes it possible to maintain our lifestyle—the ability to earn income. But what about disability insurance for the self-employed? Could it be extra important for them to have an income protection plan?
Why Is Disability Insurance for the Self-Employed Critical
The self-employed do not have the luxury of a large company providing disability plans.
If you run a one-person company and you become sick or disabled, who will carry on your business if you do not have disability insurance? This is where disability for the self-employed becomes invaluable. Without disability insurance there would be no income for your business.
Unfortunately, if you were to become sick or disabled, your personal and business obligations march on. You are liable for all business debts, because there is no legal distinction between personal and business assets if you have a sole proprietorship.
So, without disability insurance for the self-employed, you could lose everything you own, including the greatest thing: Your dream. Adequate disability coverage can provide you with enough cash flow to prevent these losses.
When Shopping, Consider these Disability Features
To clarify, there is not a disability insurance category. However,to those who are self-employed, the following disability features may be particularly helpful.
Definition of Disability: Each insurance company defines disability insurance differently. Look for Own-Occupation coverage to protect yourself if you cannot work in your own occupation.
Waiting Period: There are various waiting periods. Normally, there is a 90-day wait before you receive income. A shorter waiting period is available if you are willing to pay more.
Benefit Period: How long should the insurance company pay out? Are you looking for five-year, 10-year, or until the age of 65 coverage? As with everything, the longer the benefits are available, the more expensive the coverage.
Future Increase Option: Will you have the opportunity to increase your benefit down the road as your income goes up? This option is vital if you anticipate an increase in income. For it will allow you to increase your benefit without having to qualify medically. And if you receive disability insurance when you are young, there is a strong reason to believe that your income will grow over time.
Guaranteed Renewable: If you’re buying individual disability insurance, it is very important to look for insurance that you can keep as long as you want. Look for guaranteed renewable insurance. This means that the insurer cannot cancel the coverage as long as you pay your premiums on time. They might be able to raise the rates, but only for an entire class of people, not for an individual, and they must obtain approval from your state’s insurance regulators in order to do it. Even more robust, but less common in recent years, is non-cancelable insurance. As long as premiums are timely, neither coverage nor price can be changed.
Key Person Option: Key Person coverage provides cash flow to help companies maintain a profit in the event that a key employee becomes disabled.
Even The Financially Savvy May Not Be Covered
Entrepreneurs are no less likely to overlook disability insurance than many other people. Ryan Michler, a certified financial planner, comments on http://gobig.work/category/news/:
“Beyond a shadow of a doubt, entrepreneurs overlook disability insurance more than any other form of insurance … The odds of you suffering an injury or illness during your working years are far greater than any other potential loss. Do not overlook the importance of disability income insurance in your business plan.”