Independent Contractors can purchase disability insurance
Although most people don’t like to think about it, it is estimated that roughly 1 in 3 Americans will experience at least 90 days of disability before they reach age 65. And, while some may be covered by sick pay or workers comp through an employer, there is a growing number of independent contractors in the U.S. today who could face devastating financial loss if faced with this situation. With this in mind, having a good solid disability insurance policy can be a smart backup plan.
Things to Consider
Disability insurance can include many components. These plans can be designed to fit specific needs. When considering a disability insurance policy, you should keep the following factors in mind:
- Elimination Period – The elimination period in a disability insurance policy works like a deductible in other types of insurance. In other words, this is a set number of days between the onset of your disability and the time that the policy’s benefits begin paying out. If you opt for a long elimination period, your policy’s premium will likely be lower. However, you will also need to be sure that you have enough cash stored so that you can pay your living expenses throughout that period of time.
- Benefit Period – The benefit period is the amount of time through which the policy’s benefits will be paid. This may be a certain number of years, or until you reach a certain age such as 65 or 67.
- Disability Definition – Not all policies define disability in the same manner, so it is important to ensure that you understand exactly what will – and will not – qualify as a disability on the plan you are considering.
- Expenses – Most disability insurance policies will pay out between 60 and 80 percent of an insured’s income amount. As an independent contractor, be sure that you get a disability insurance policy that covers self-employment income. This is important, as you likely have additional expenses as compared to those who work as full time employees for a company.
In any case, be sure that you read all of the fine print and that you understand all of the policy’s features and benefits before signing on the dotted line. It is typically advised to compare at least two or three different policies in order to get an idea of the different benefits offered and the premiums that will be charged.