As a self-employed individual, it’s important to safeguard yourself from unforeseen circumstances that result when you are unable to work, especially due to illness. One major way to do this is through the purchase of loss of income insurance for self-employed persons.
This insurance is important because it helps keep your business going even when you are ill, injured, or unable to work. So, to make it easier for you, we will be providing you with a list and in-depth information on this insurance. Therefore, you just have to stick around while we walk you through this educational read.
The flexibility and freedom that come with being self-employed, whether you are a freelancer or small business owner, bring undeniable happiness. However, with this freedom comes a unique set of financial challenges. So that is where this type of insurance comes into play.
To start with, let’s understand what loss of income insurance is all about.
What is Loss of Income Insurance?
Loss of income insurance, also known as disability income insurance, is a type of insurance that helps you replace some of your income if you become unable to work as a result of any disability.
This type of insurance plays an important role in your financial life, as you may not have access to traditional employer-provided disability benefits.
You are responsible for your business’s success as a self-employed individual; you are the captain of your ship and the master of your plans. This freedom can be heartwarming, but it also comes with its challenges in the sense that you may not have access to sick leave, disability benefits, etc.
Types of Loss of Income Insurance for Self-Employed
The loss of income insurance is divided into two parts. They are:
This type of loss of income insurance is also known as temporary disability insurance. It typically covers a percentage of your income for a period of up to two years.
Long-term loss of income insurance, also known as permanent disability insurance, can provide the replacement of your income for a longer period, often until retirement age.
However, both types of insurance typically have a waiting period before benefits begin, and most policies have a maximum benefit period.
Benefits of Loss of Income Insurance for the Self-Employed
The following are the benefits of loss of income insurance for those who are self-employed:
Overview of the Benefits of Loss of Income Insurance for the Self-Employed
Isn’t this the sole purpose of this insurance? Well, it is. It provides a stream of income when you can’t work due to covered reasons.
In such cases, your bills, mortgage, rent, and other financial matters will be taken care of while you focus on your recovery or managing your business during difficult times.
Peace of Mind
This is one of the core benefits of this insurance. Just the thought that your financial issues have been sorted out gives you peace of mind.
You can now focus on your work without constantly worrying about what might happen if you are unable to generate income for an extended period.
You can customize this insurance policy to align with your financial and personal needs. The waiting period, as well as the amount of coverage, can be customized.
Even in your absence, this insurance will help keep your business going. It will sort out things like salaries, rent, utilities, etc.
Now that we’ve gotten this far, let’s quickly see the factors that affect loss of income insurance for the self-employed.
Factors that Affect Loss of Income Insurance
The following are the factors:
The cost will determine whether you will go for the policy or not. When it comes to this insurance, there are two types of costs to consider.
There are premium costs and deductible costs. The premium is the amount you’ll pay each month to maintain your policy, while the deductible is the amount you’ll have to pay out of pocket before your benefits kick in.
Both of these costs can vary depending on the insurance provider and the specific policy you choose.
This has to do with the specific details of your insurance policy, such as the length of the benefit period, the waiting period, and the definition of disability.
The length of the benefit period means how long you’ll receive benefits if you become disabled, while the waiting period is the time between when you become disabled and when your benefits begin.
And the third one is exclusions. These are some of the situations that are not covered by your policy. They could include things like self-inflicted injuries or injuries that you sustained while engaging in risky activities.
You have to realize that it’s important to understand the exclusions of your policy before you purchase it, so you’ll know what is and isn’t covered.
List of Loss of Income Insurance Companies for Self-Employed
The following is a list of the best loss-of-income insurance companies for self-employed people:
- Mutual of Omaha
- Northwestern Mutual
- Lincoln Financial
Overview of Loss of Income Insurance Companies for Self-Employed
1. Mutual Omaha
Year Founded: 1908
Description: Mutual of Omaha is a highly reputable insurance company that has been in the insurance business for over a century now.
It offers both short-term and long-term loss of income insurance coverage to its customers. This firm has a special feature that returns your premium in a situation where you no longer need the insurance plan.
It is a special feature for individuals as it has your best interests at heart and, as well, protects your investment.
- It has a wide range of coverage options
- This insurance firm has competitive rates
- There is a special feature that enables you to get your premium back.
- Some of their policy features may not be available in all countries
- There are certain limitations and exclusions to their offers.
Year Founded: 1851
Description: This is a well-established insurance company that offers different insurance plans for self-employed individuals.
Just like Mutual of Omaha, MassMutual offers both short-term and long-term policies, with a variety of coverage options and benefits.
MassMutual offers several options to customize your long-term disability policy as well. Their website also has a calculator feature that enables you to determine how much coverage you may need.
- Wide range of coverage options
- Level-premium and age-based premium options
- Customizable benefits and riders
- Some exclusions and limitations
- May not be available in all states
Year Founded: 1887
Description: Ameritas is one of the smallest loss-of-income insurance companies out there that is well respected in the insurance industry.
Their policies are highly customizable, with a range of benefits. This can be helpful for self-employed individuals who may need longer-term coverage in the event of a disability.
- Ameritas offers a one-year benefit period if you’re looking for only a short period of benefits.
- They have several different types of discounts available. One of them is a discount if you haven’t used tobacco for the past year.
- Ameritas does not have online quotes.
Year Founded: 1964
Description: Assurity is another renowned insurance provider that offers a range of disability insurance policies. They are known for their flexible options and their commitment to customer service.
This insurance provider makes it easy for you to customize your plans based on your needs and budget. Also, they allow you to tailor your policy to meet your specific needs.
- Their online quotes are available.
- They have customizable plans that are tailored to your budget and needs.
- They have limited choices of length of benefits compared to top competitors
- The ability to get the most generous benefits depends on your occupation.
Year Founded: 1979
Description: Another top firm here is Principal. This is a large insurance company that offers a variety of insurance products.
You can choose a benefit period of up to 10 years with this insurance. This can be helpful for self-employed individuals who may need longer-term coverage in the event of a disability.
- They have competitive rates
- Principal insurance is financially buoyant and stable.
- They have reputable customer service
- A wide range of distribution channels
- They have higher premiums than some competitors
- Some policy options are only available through an agent
- There is a minimum income requirement for some policies
Year Founded: 1860
Description: Guardian Insurance is another well-established insurance provider that offers various financial products.
Also, it offers short-term and long-term disability insurance for self-employed and gig economy workers.
This insurance offers a fast online quote and has many customizable plans.
Year Founded: 2019
Description: In a nutshell, Breeze is a relatively new insurance company that uses technology to make it easier and more affordable for people to get disability insurance.
Purchasing insurance with Breeze is very swift and easy. You can get a quote and apply for coverage online. You can also get customized policies that are tailored to your specific needs.
- Their application process is swift and simple.
- No medical exams or health questions required
- They have flexible policy options
- This insurance firm has affordable premiums.
- May not have the same reputation as more established companies
- Their policies may not be as comprehensive as other options
- Customer service may not be as responsive as some other companies.
8. Northwestern Mutual
Year Founded: 1857
Description: Northwestern Mutual is one of the largest and most established insurance companies that provides loss-of-income insurance for the self-employed.
This company has been in existence for over 30 years now, and they still maintain their quality products.
It offers a range of insurance and financial products, like disability insurance.
- it is a reputable and well-established company
- this insurance has a wide range of coverage options
- Flexible policy customization
- It offers comprehensive benefits and features
- Its customer service is always available 24/7.
- May have stricter eligibility requirements than other options.
9. Lincoln Financial
Year Founded: 1905
Description: Lincoln Financial’s disability insurance policies are designed to help individuals and families protect their income in the event of a disability.
The policies are customizable, so you can tailor the coverage to your specific needs.
- They have solid financial backing and a reputation
- Lincoln has a wide range of policy options
- Flexible policy customization.
- It requires a medical exam and health questions
- May have stricter eligibility requirements than some other options
- Its premiums may be higher than some other options.
Year Founded: 1984
Description: Just like other insurance companies, Nationwide’s loss of income insurance policies are designed to protect your income in the event of a disability.
The policies are customizable, and they offer a variety of benefits, such as cost-of-living adjustments and lump-sum payments.
- They have a wide range of policy options
- This insurance provider offers comprehensive coverage, including protection for your income and your family
- Their Customer service is highly rated
- Rehabilitation and return-to-work assistance are available
Their offers and discounts may not be available in every location.
FAQs on Loss Of Income Insurance Companies for Self-Employed
What is the difference between short-term and long-term loss of income insurance?
Short-term loss of income insurance, also called temporary disability insurance, usually has a benefit period of up to two years. Long-term loss of income insurance, also called permanent disability insurance, usually has a benefit period of up to retirement age. In general, short-term policies are less expensive but have a shorter benefit period. Long-term policies are more expensive but provide coverage for a longer period.
Are there any tax implications of having loss of income insurance?
In general, any benefits you receive from loss of income insurance are taxable. However, there may be some exceptions, so it's always best to speak to a tax professional about your specific situation. It's also important to note that the premiums you pay for loss of income insurance may be tax-deductible as a business expense.
How does the loss of income insurance differ from disability insurance?
Loss of income insurance and disability insurance are similar, but there are some key differences. Loss of income insurance is designed to replace your income if you are unable to work, while disability insurance is designed to replace your income if you are unable to work due to a specific disability. In addition, loss of income insurance typically has more limited coverage than disability insurance. And finally, loss of income insurance is not regulated by the government, while disability insurance is regulated by the government.
What happens if I become disabled and am unable to work again?
If you become permanently disabled and are unable to work again, you will likely continue to receive benefits from your loss of income insurance policy until the end of the benefit period. However, it's important to read your policy carefully, as some policies may have specific rules about when benefits end. In addition, you may be eligible for other types of assistance, such as Social Security disability benefits.
As a self-employed individual, you should invest in loss of income insurance because it provides a safety net that ensures you can maintain your financial balance and peace of mind.
You shouldn’t leave your financial well-being in the hands of chance or luck, so protect your future by investing in loss-of-income insurance tailored to your needs and circumstances.
Good luck from this side.