Are 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 annual premiums when they file taxes. However, your condition must last one year or longer to be eligible.
Take proactive steps to avoid the calamity of lost income. Learn what a policy might cost monthly and the pros and cons of two purchase channels.
Then, buy coverage before you file a claim for benefits.
Costs 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, consider the price you pay for two types of mistakes.
- You need surgery but have no coverage. Obtaining loans without proof of income will be challenging unless you have tax returns.
- You have coverage but remain healthy: owning a policy may cost about an hour’s wage per week or 1/40 of your typical earnings over this period.
Premium Costs
Receive a personalized estimate for your coverage to forecast 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 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 a new policy while pregnant, excluding any maternity-related claims during the first year. However, you could enjoy coverage for accidents, illnesses, and subsequent pregnancy.
Second, policies with short elimination periods have higher premium costs but pay 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 Options 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.
- Offers the most comprehensive benefits
- 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, allowing 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.
- Guaranteed insurability for pre-existing health conditions
- Maternity leave benefits for normal childbirth
- Payment for mental health (anxiety & depression)
Sole Proprietors
The best short-term disability for self-employed sole proprietors is an individual policy you can buy outside of a worksite environment.
Short-term disability is accessible to individuals because you do not have to be affiliated with a larger entity. Sole proprietors purchase the coverage privately directly from an agent licensed in their state.
Remember 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.
Social Security
Social Security Disability Insurance (SSDI) 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.
SSDI covers impairments lasting twelve months or longer – even temporary. Independent contractors, 1099 employees, and sole proprietors can file claims because they fund the premiums every year via your self-employment taxes.
You file IRS Schedule SE every year, which enumerates your FICA taxes owed. These taxes fund three government benefits.
- Social Security Retirement
- Social Security Disability
- 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. To file a claim, you must proactively opt into the program before becoming sick, hurt, or pregnant.
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 working 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.
