Short-Term Disability Insurance for Self Employed Workers

Are the self-employed individuals eligible for short-term disability? You qualify to file a claim if you purchased a policy through your state or a private insurance company before getting sick, hurt, or pregnant.  

Fortunately, Social Security disability insurance automatically covers self-employed workers because the government forces them to pay premiums every year when they file taxes. However, your condition must last one year or longer to be eligible.

Avoid the calamity of lost income by taking proactive steps. Learn what a policy might cost per month and the pros and cons of two purchases channels.

Then, buy coverage before you need to file a claim for benefits.

Cost of Short-Term Disability for Self-Employed

There is no average cost for self-employed short-term disability insurance. Too many variables influence the equation determining 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.

Premium Costs

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

Use our short-term disability monthly cost calculator to see how the premiums change based on various factors. Your choices impact the rates you might pay.

  • Policy Features
    • Elimination period
    • Benefit length
    • Monthly Amount
  • Industry or Occupation
  • Personal Characteristics
    • Age
    • Tobacco use

Pregnancy Costs

The cost of self-employed short-term disability for pregnancy includes factors that women can easily overlook because the critical distinctions are obscure.

First, you can buy short-term disability while pregnant, but the policy will exclude any maternity-related claims during the first year. However, you could enjoy coverage for accidents and illnesses and any subsequent pregnancy.

Second, policies with short elimination periods have higher premium costs but pay out more for maternity-related claims that typically last only eight to twelve weeks. Bet big when you influence an unknown outcome.

Finally, the purchase channel you use profoundly impacts whether the policy covers your recovery from childbirth. As discussed in the next section, the best choice could require extra steps.

Best Short-Term Disability for Self-Employed

The best short-term disability insurance for the self-employed provides the optimal combination of two characteristics, which might vary for independent contractors, sole proprietors, and small business owners.

  1. Offers the most comprehensive benefits
  2. Has the most lenient underwriting standards

Independent Contractors

The best short-term disability for self-employed independent contractors is a voluntary policy that you might be able to obtain through one of the companies paying you as a 1099 employee.

Many large groups offer voluntary (employee paid) policies and allow W2 and 1099 contract employees to participate and pay the premiums via payroll deduction.

Group coverage is always better than an individual plan because the insurance company sees safety in numbers. For instance, you might be able to enjoy these advantages.

Sole Proprietors

The best short-term disability for self-employed sole proprietors is an individual policy that you can buy outside of a worksite environment.

Individual short-term disability not through employers is accessible because you do not have to have an affiliation with a larger entity. Sole proprietors purchase the coverage privately directly from an agent licensed in their state.

Bear in mind that sole proprietors do not offer safety in numbers to issuing insurance companies. Therefore, expect more stringent application underwriting, higher premiums, and more restrictive benefits for maternity leave.

Small Business Owners

Voluntary short-term disability is ideal for self-employed small business owners with three or more benefit-eligible employees because they get the best of both worlds: easy access and more comprehensive benefits.

A benefit-eligible employee is any person doing work for your small business for whom you are willing to support a payroll deduction.

  • Independent contractors
  • Salaried employees
  • Hourly employees
  • Freelancers

Small business owners decide whether to offer a voluntary plan to employees and whether to support the payroll deduction. Call your local disability insurance company to set things up.

Social Security

Short-term disability through Social Security is the best option for the self-employed who waited until after getting sick or hurt to investigate their insurance options because the government forces them to enroll through income taxes.

Social Security disability covers impairments lasting twelve months or longer – even if they are temporary. Independent contractors, 1099 employees, and sole proprietors can file claims because they fund the premiums every year via your self-employment taxes.

Every year you file IRS Schedule SE, which enumerates your FICA taxes owed, which fund three government benefits.

  1. Social Security Retirement
  2. Social Security Disability
  3. Medicare

State Plans

State-sponsored temporary disability insurance is the final option for the self-employed. We list this option last because only seven states offer a program covering temporary disabilities lasting less than twelve months: California, Hawaii, Massachusetts, New Jersey, New York, Rhode Island, and Washington State.

Some of these states allow solo workers to enroll in temporary disability programs. Beware; the enrollment is not automatic as with Social Security. You must proactively opt in to the program before becoming sick, hurt, or pregnant to file a claim.