Short-Term Disability Insurance for Self Employed

Can you get short-term disability if you are self-employed? Yes, you can buy a policy as an individual, a small business owner, or through your state if offered.

Of course, you must take this step before becoming sick, hurt, or pregnant if you are seeking to file a claim for benefits.

First, learn about the factors that will determine what your premiums might cost each month. Then, discover the key differences between individual and voluntary policies.

Choose the coverage option that is best for your needs. Request a quote when you are ready to be covered.

Self-Employed Short-Term Disability Cost

There is no average cost for self-employed short-term disability insurance. There are simply too many variables baked into the equation that determines what you might pay in monthly premiums. However, a good rule of thumb is that owning a policy may cost about an hour’s wage per week or 1/40 of your income.

Getting a quote is your best first step. Learning the policy features, and industry classifications driving the price is the second.

Table Of Contents

Cost Quotes

Get a short-term disability quote to estimate the premium cost of a policy for self-employed individuals. An agent may contact you to review your needs and present options.

Insurance companies price premiums based on several features you choose at the time of enrollment. In addition, your industry or occupation factors into what you might pay.

Policy Features

The short-term disability features that you choose when purchasing a policy drive your monthly premium cost. Self-employed entrepreneurs may be extra sensitive to some of these options.

  1. Waiting or elimination period determines how quickly benefits begin after a covered loss. Shorter elimination periods (0 days for accident/7 days for sickness) cost more than longer choices (90 days for accident/90 days for sickness).
  2. Benefit periods determine how long claim payments continue while you remain unable to work. Shorter benefit periods (3 months) cost less than longer choices (24 months).
  3. Benefit amount determines how much the policy pays each week or month. Higher amounts cost more than smaller amounts. You can replace up to 70% of income.

Occupation or Industry

Your self-employed occupation or industry also determines your short-term disability premium costs. Each occupation and industry presents a different risk profile to insurers. Therefore, they rate your policy accordingly.

For example, occupations classified A pay the lowest rates, and D the highest. Your insurance company might group risks similar to these examples.

A Rated

AccountantsArchitectsComputer Programmers
Financial PlannerGraphic DesignersLawyers
PlumbersReal Estate Agents 

B Rated

ExterminatorsInsurance AgentsMortgage Brokers
NursesSpeech TherapistsVeterinarians

C Rated

Auto MechanicsCatererChiropractors
FloristsLimo/Uber DriverOptometrists
PaintersPersonal TrainerPhotographers
Physical TherapistsTruck DriversYoga Instructors

D Rated

Bus DriversHair StylistsFarmers

Best Short-Term Disability for Self Employed

What is the best short-term disability insurance for the self-employed? Beauty is in the eye of the beholder. The optimal coverage factor comes down to a choice between better benefits and easier access.

Sole proprietors, small business owners, and independent contractors often have different purchase channel options. Buying at work versus as an individual has unique pros and cons.

Individual Coverage

Individual short-term disability insurance for the self-employed offers easier access. Sole proprietors and freelancers can buy coverage as an individual without having to go through an employer. You may need to provide at least two years of tax returns in order to verify your income.

In addition, expect the medical underwriting to be stricter. The insurance company does not have the ability to pool risks when you are a solo worker.

Small Business Owners

Voluntary short-term disability is often the best option for self-employed small business owners with three or more benefit-eligible employees. A benefit eligible employee is any person doing work for your small business for whom you are willing to support a payroll deduction.

This could include any of the following.

  • Independent contractors
  • Salaried employees
  • Hourly employees
  • Subcontractors

Voluntary policies are often better for small business owners because they offer more lenient medical underwriting, and richer benefits when compared to private plans. The insurer can pool risks with at least two other people.

Self-employed small business owners can also take advantage of other supplemental health insurance plans. Many insurance companies combine these other supplemental voluntary policies.

Independent Contractors

Short-term disability for independent contractors presents a unique twist. Employers pay independent contractors who are self-employed. The employer issues a 1099 statement at the end of the tax year rather than a W2.

Employers are not required to offer benefits to 1099 contractors – but they can. Some insurance companies allow groups to offer voluntary policies to independent contractors provided they withhold premiums from each paycheck.

  • Voluntary may be an ideal policy option for contractors serving small businesses who want maternity leave pay (see below). Small business owners are more likely to support a payroll deduction.
  • Individual policies may be a better alternative for contractors serving larger groups. Large entities are less likely to support a payroll deduction for a handful of people.

Covering Pregnancy

Self-employed short-term disability insurance covering pregnancy is a key benefit for women. The difference between voluntary and individual policies is most stark in relation to pregnancy and maternity leave.

Female entrepreneurs planning to conceive need to pay close attention to the crucial distinction between these two policy types as it relates to qualifying medical conditions.

  • Voluntary policies available through small businesses (3+ employees) cover labor and delivery after a normal pregnancy.
  • Individual policies bought privately outside of employers do not cover childbirth after a normal pregnancy.
  • Both policy types (voluntary and individual) cover complications of pregnancy that occur before the due date.

Coverage must begin before conception with both policy types.

Social Security

Social Security disability benefits for the self-employed are a fallback option for people expected to miss a year of work or more. Remember, Social Security does not cover temporary disabilities – those expected to last less than 12 months.

Sole proprietors automatically pay Social Security disability premiums each April when they file a tax return. IRS Schedule SE (Self-Employment Tax) forces you to fund both sides of the FICA payroll taxes (7.65% for both employees and employers – subject to limits).

  • OASDI (Old Age, Survivors, and Disability Insurance): 6.20%
  • HI (Medicare): 1.45%

State Temporary

State-sponsored temporary disability insurance is the final option for the self-employed. We list this option last because only five states offer a program covering temporary disabilities. These states are California, Hawaii, New Jersey, New York, and Rhode Island.

Some of these states allow solo workers to enroll in their temporary disability program. Beware; the enrollment is not automatic as with a small business or larger employer. You must proactively opt into the program before becoming sick, hurt, or pregnant.