3 Reasons Why Freelancers Should Get Disability Insurance

Finance

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Intro:

No shortage of personal or business insurance policies exists for freelancers, especially entering 2023. The federal government mandates that independent contractors purchase some policies, such as worker’s compensation and social security. 

However, it does not mandate that all individuals carry disability insurance coverage. Instead, the government has left it up to the states, and five of them do have mandates in place. 

The states that require it are:

  • California
  • New Jersey
  • Hawaii
  • New York
  • Rhode Island

Therefore, freelancers who live in the above states should get coverage to satisfy legal requirements.

Other reasons why freelancing professionals should purchase coverage also exist. For example, it offers individuals peace of mind, especially solopreneurs. 

Statistics show that financial insolvency is the top reason why new businesses fail in the first two years. Lack of finances can shut down companies, even if they have existed for decades. 

Therefore, entrepreneurs must figure out how to keep positive cash flows, and insurance is one solution. Disability insurance creates a financial runway when freelancers cannot work. 

Learn more about self-employed disability insurance at Selfgood.

Here this article outlines three reasons why freelancers should get disability insurance.

1. Cover Expenses

Like other insurance policies, disability insurance provides financial payouts. Commercial auto insurance payouts help vehicle owners repair or replace damaged cars. Professional liability insurance allows defendants to pay awards that courts give to plaintiffs.

Disability policies help individuals stay on their feet financially after becoming so disabled that they cannot return to work.

Professionals recommend that individuals list their professional and personal financial needs before purchasing their policies. Then, they can buy the right policy and adequate coverage.

For example, take into account how much you’ll need to cover:

  • Rent
  • Utilities
  • Meals
  • Business overhead
  • Household needs

Then, purchase a policy that can keep you afloat for a few months in the short term and longer with a long-term policy.  

Obtaining disability insurance payments is a process. Social security disability payments can take five months to receive on average. Therefore, make the policy part of a financial emergency plan. 

Moreover, the policy costs rank lower than other necessary insurance policies, such as healthcare, auto, and general liability. Thus, it’s a cost-effective investment. 

2. Peace of Mind

Insurance professionals encourage individuals to purchase policies that cost between 1% to 3% of their annual income. The amount policyholders can expect varies, but the average payment ranges between $700 to $1,800 monthly.

Since a Magic 8 Ball cannot predict whether one individual or another will experience a disability, professionals must use the tools available to them to create peace of mind.

At least 75% of employees plan for retirement through employer-sponsored programs. However, peace of mind goes beyond retirement planning.

Entering 2023, individuals can create living wills in case they become incapacitated suddenly. As health care costs continue rising and passing away requires an investment, individuals can help their causes by preparing for the Golden Years in their mid-20s.

Some people become disabled slowly. A chronic condition takes over their body, and they experience the progression. Others don’t see disability coming. Instead, it happens suddenly after an accident that occurs out of their control. 

No one desires to lose their ability to work. Disability insurance creates peace of mind and provides a financial runway, especially if the situation is only short-term.

3. Plan for the Future

Individuals become partially, severely, and fully disabled for several reasons. The top reasons for disabilities include:

  • Genetic
  • Work-related
  • Accidents
  • Mental health
  • Chronic conditions

Therefore, freelancers benefit from understanding their health and financial situation. Independent contractors experience seasonality conditions and remain susceptible to economic downturns. 

Thus, it helps to view disability insurance as a tool that helps individuals plan for the future. Professionals susceptible to chronic health conditions have a higher risk of becoming disabled, especially after a heart attack or stroke. 

By planning for the future, entrepreneurs protect themselves, their businesses, and their families. 

Freelancers who have families take some of the financial burdens off them. Not only does the freelancer lose their ability to work, but they might also require a family member to stop working and care for them. 


Conclusion

Freelancers should invest in a bucket of insurance policies, including disability. The policy helps them cover expenses if they cannot work for extended periods. 

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