Best Disability Insurance for Self-Employed

Today’s work climate is geared toward freelance jobs, which makes it especially important for self-employed people to know how to arrange for their financial needs. One major fear among sole proprietors is the prospect of losing income from injury or illness. Many insurers offer disability insurance for self-employed people.

Which carriers offer the most comprehensive coverage? Here’s a list of companies that provide the best disability insurance for self-employed workers.

Best Disability Insurance for Self-Employed Workers

• Best for Easy Application: Breeze
• Best for Short-Term Disability: Assurity
• Best for Long-Term Disability: Mutual of Omaha
• Best for Adaptable Plans: Guardian
• Best for Discounted Premiums: Ameritas
• Best for Replacing Income: Northwestern Mutual

6 Best Companies for Disability Insurance for Self-Employed People

Here are six of Benzinga’s favorite companies for self-employed disability insurance.

Best for Easy Application: Breeze

Breeze’s policy application platform is easy to navigate. Its application process can take around 15 to 20 minutes, which is fast. The carrier offers short- and long-term disability insurance and coverage for critical illnesses and accidents. Breeze’s policies are underwritten by Assurity Life Insurance.

Best for Short-Term Disability: Assurity

Assurity is an established, well-regarded company that offers short-term disability insurance, covering many occupations that other insurers can’t. Its online application process is easy. Assurity offers quotes that cover add-on benefits (residual disability, automatic benefit increases, own-occupation disability definitions). 

Best for Long-Term Disability: Mutual of Omaha

Mutual of Omaha is a superior choice for long-term and short-term disability insurance. Its primary focus is blue-collar industries, which can result in more injuries and insurance needs. Its lineup of product offerings is remarkably diverse, including life insurance, annuities, Medicare supplements and end-of-life expenses. 

Best for Adaptable Plans: Guardian

Founded in 1860, Guardian boasts an A++ rating from AM Best, the highest possible ranking. It has a wide-ranging, true own-occupation definition of disability, allowing self-employed policyholders to claim benefits from being unable to work in their given field. Guardian’s policies have guaranteed renewability up to age 70 and are non-cancellable. 

Best for Discounted Premiums: Ameritas

Another veteran provider, Ameritas, offers several benefits and handles add-on coverages. Its definition of disability includes true own-occupation and any occupation coverage for self-employed workers who can’t work in their chosen fields. Ameritas offers benefits for continued good health, benefit advancement and COBRA premium help. 

Best for Replacing Income: Northwestern Mutual

Northwestern Mutual is one of the most well-regarded institutions for disability insurance, especially for self-employed freelancers. Northwestern Mutual strives to make decisions on claims within 30 days of submission. It doesn’t offer online quotes for disability insurance, which means you’ll need a local insurance agent to understand their coverage policies. However, this also allows it to tailor your policy to your needs.

What is Disability Insurance for Self-Employed?

Disability insurance helps workers protect themselves after a serious illness or injury. It’s especially crucial for the self-employed since they’re often sole proprietors who may not generate income from other sources.

A disability insurance policy can cover expenses for things like:

• Replacement of lost income
• Medical expenses
• Business expenses (rent, utilities, overhead)
• Day-to-day living expenses (groceries, mortgage, home utilities)
• Rehabilitation expenses
• Partial disability benefits
• Future income protection

Every insurance carrier has different criteria for coverage. Certain components of disability insurance may not be available in every locale. Check with an insurance agent to verify what coverages are accessible in your state.

How Does Disability Insurance for Self-Employed Work?

To illustrate how disability insurance works for the self-employed, it’s helpful to look at a hypothetical case study. Consider Maxwell, who is a 32-year-old freelance news photographer. Since his job involves physical risks, he looks into disability insurance options.

After crunching the numbers, Maxwell decides to find a policy paying out $4,000 a month, about 75% of his usual income. He goes with a long-term disability policy effective for six years and opts for a 90-day elimination period.

Maxwell gets quotes on insurance from carriers. Ultimately, he selects a policy with a $150 monthly premium. He provides his chosen company — for this example, it will be called “Secure Insurance” — income and tax documentation. Secure defines disability as an inability to complete 50% of most essential functions for at least 90 consecutive days.

Two years into the policy, Maxwell gets into a bicycling accident, shattering his tibia. The surgery goes well, but doctors tell him he shouldn’t go back to work for at least four months. Maxwell submits a claim to Secure Insurance with his doctor’s affirmation of his diagnosis and recovery time.

After the 90-day elimination period, Secure activates Maxwell’s monthly benefit and sends $4,000, covering his living expenses. He paid his premium with after-tax funds, so his monthly benefit is tax-free. 

Finally, Max decides to have Secure attach a rider for cost of living adjustments (COLA) so his monthly benefits will increase to keep up with inflation. After six months of recovery, Maxwell goes back on the job, ending the benefit.

Short-Term vs. Long-Term Disability Insurance

Self-employed workers can choose policies to cover short or longer periods of disability depending on the severity. Short-term disability coverage usually has a shorter elimination period, after which policyholders can earn a percentage of their pre-disability income. Premiums for long-term disability insurance tend to be higher than short-term.

How Much Does Disability Insurance Cost?

Several factors come into play when pricing disability insurance premiums, including age, occupation and lifestyle. Generally, you can expect your policy to cost between 1% and 3% of your annual income.

How to Qualify

To get self-employed disability insurance, you’ll need to meet certain requirements, including the following:

• Proof of self-employment
• Income statements and documents
• Health examination
• Occupational risk evaluation
• Financial reserves
• Requirements for specific areas of coverage

Other factors that may affect your coverage are age, gender, policy riders and location.

Look for the Best Disability Insurance for Self-Employed People

If you’re a self-employed sole proprietor, take a little time to research what companies offer the best disability insurance for self-employed people. A solid policy can be a literal life-saver during recovery.

Frequently Asked Questions