Self employed short term disability insurance is a reality. Don’t fall for the myth that only people working at large employers can get adequate income security.
Policies are available for the self-employed but with key limitations. Look for coverage based upon your objectives. Finding the right policy may not be easy, but could be worth the effort.
Learn how short term disability insurance works for the self-employed.
- Coverage objectives – accidents, illnesses, pregnancy complications, maternity leave
- Alternative options – state programs and spousal coverage
Self Employed Short Term Disability Objectives
If you are looking for short term disability insurance as self employed person you must consider your objective. Your objective determines where to find the policy that meets your needs. There are different approaches to take based upon what you want your policy to cover: normal childbirth and maternity leave, pregnancy complications, or typical accidents and illnesses.
In order to receive income replacement during maternity leave a policy must cover recovery from normal childbirth. These policies are only available as short term disability employee benefits. But that does not mean self-employed workers are shut out. There are two ways to get these policies.
Many self-employed workers operate and/or get paid as 1099 employees. Many women operate as self-employed contract employees of larger agencies. These agencies can offer an employee paid option to both w2 and 1099 employees. Certain companies will issue policies to 1099 workers – provided the agency agrees to withhold the premium from their paychecks.
Many self-employed workers pay other 1099 employees. They may subcontract work out to other people. Certain companies will establish a group with just three 1099 contract employees. As long as the self-employed person pays two other workers as 1099 contractors, then they qualify as a group and can purchase policies covering childbirth.
Many self-employed workers are unable to purchase coverage for normal childbirth. The reason carriers market through employer groups only is that normal childbirth is a planned event for many families. The policies lose money for the issuing company. A very high percentage of pregnancies are planned, and result in a normal childbirth.
Complications for pregnancy are quite common, but not a planned event. Twenty five percent of pregnancies will experience one or more complications of pregnancy. That means seventy five percent of pregnancies will be normal – a claim won’t be made.
Self-employed workers can purchase individual short term disability policies directly. Normal childbirth is never covered by policies purchased through this channel. However if you are planning a pregnancy there is still a strong reason to purchase the coverage.
Accident and Illnesses
The options for the self employed expand when the objective is to protect income for non-pregnancy related accidents and illnesses. The individual plans cited above are the first option.
Long term disability insurance works very well for the self-employed. Those concerned more about traditional accidents and illnesses have expanded options, and better income security. There are far more company’s in the market that sell directly, and by definition the income security last far longer.
Alternative Options for Self-Employed
There are two alternative options for self employed short term disability insurance. These two options don’t work quite as often as the others previously mentioned, but can’t be ignored.
State Disability Insurance
Six regions have mandatory state short term disability benefit programs. Those regions are California, Hawaii, New Jersey, New York, Puerto Rico, and Rhode Island. Many of these state programs allow for the self employed to participate. You must of course elect to participate prior to becoming sick, injured, or pregnant in order to be eligible to file a claim.
Self employed women working in California can enroll directly in both the state disability and paid leave program.
Hospital Indemnity Insurance
Self employed women planning a pregnancy may want to consider purchasing hospital indemnity insurance in lieu of short term disability. The policies can be purchased directly in some states – not all. Benefits are paid upon admission to the hospital for normal childbirth. Additional benefits may be paid for each incremental day of confinement.
Bonus benefits may be paid if your infant is confined to Neonatal Intensive Care. If twins or triplets are born and require specialized care (which they often do), the policy may make a daily confinement payment for each infant.
Health insurance coverage is one of the biggest stumbling blocks for new business startups and the self-employed. Often the people with the greatest advantage have spouses working for larger employers. Larger employers often provide rich benefit options that cover all of an employee’s dependents – including their self employed spouse.
Short term disability insurance usually is not available for spouses of employees. However, certain company’s allow a short term disability rider to be added to a personal accident policy. The disability rider can cover spousal accidents and illnesses.
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