Insurance for the self-employed

Anyone setting up a business usually has to sign up for, or at least consider several insurance policies for the self-employed. Which and how many insurances a business founder needs depends on their specific industry, as well as on their lifestyle at home.

In principle, it is advisable for company founders to first identify their operational risks before buying insurance policies. However, it is also important to consider what personal risk you may be taking as a self-employed individual. Listing potential risks can be very useful, and shows you where to focus your attention. It could be that your business will need different insurance policies depending on the stage of its development.

Personal insurance for the self-employed

When setting up a business, you should also consider your personal risks and analyze them carefully. There are certain risks against which you must be protected. For example, health and long-term care insurance are required by law. In addition, there are a number of personal insurance policies that can be taken out depending on the situation.

Health insurance

An insurance which could save a freelancer or self-employed business person thousands, and yet one which many people skimp on: health insurance. There are many options available out there, but don’t let them confuse you. There are affordable plans too, just make sure that you get a comprehensive one! Websites such as eHealth can help you compare plans and predict prices for your state and living situation.

Furthermore, the government’s healthcare website offers a lot of advice regarding health coverage if you’re self-employed. There are several tips on the page on using the health insurance marketplace to enroll in the best coverage there is for people who run their own businesses.

Note

According to the government, if you have employees, you are not considered to be self-employed. If you have even one employee (other than your spouse, self, or other legal family member), then you will need to register for a different healthcare plan.

Income protection insurance

This insurance is a policy, which replaces your income in the short or long term if you are not able to work due to serious injury or illness. It also counts if you are unable to fulfill the major duties of your job. While it is unusual for a policy to pay you 100%, many will provide a monthly payment of 50-80% of your income, depending on which policy you take out.

Income protection insurance, sometimes also called disability insurance, will cover food, gas, education fees, credit card debt, mortgage payments, and everyday bills – in a nutshell, the essentials you have to pay, and standing payments you’ve committed to make.

You should take out an income protection plan if you’re self-employed because you cannot rely on employer sick pay. Furthermore, if you run a business that is dependent on your physical health (physiotherapist, builder), this kind of insurance is important because, in the case of injury, you won’t be able to get any income.

Accident insurance

Accident insurance covers you in the case of injury or disability caused by an accident. If you are physically active in your personal life, or simply want to be cautious, accident insurance policies are a good idea to give you peace of mind. Accident insurance acts as an additional insurance to health insurance, for example, so if you get injured skiing, and your health insurance doesn’t cover some costs to get you back on your feet as quickly as possible, an accident insurance policy may jump in. It depends on your health and accident insurance policy, so it is a good idea to get familiar with the small print!

The difference between income protection and accident insurance is that income protection insurance covers illness too, whereas accident insurance won’t cover this. The advantage of accident insurance is that it is usually cheaper – probably because it doesn’t cover illness.

Pension

Figuring out a pension plan is not the easiest task for the self-employed businessperson. However, with a bit of research and persistence, it would be one of the best forms of insurance you set up for yourself – that is, insurance for an income in your later days. The three main options are SEP-IRA, Solo 401(k), and a SIMPLE IRA. These three are all possibilities for insurance for self-employed, and each have their advantages and disadvantages.

Unemployment insurance

According to the US Department of Labor, there are several forms of unemployment insurance. State unemployment insurance, disaster unemployment insurance (DUA), and unemployment compensation for federal employees, or ex-service members, are a few of the most common unemployment insurance options listed on the government website. These schemes offer unemployment benefits to workers who are either unemployed through no fault of their own, eligible former civilian federal employees, or in the case of unemployment loss due to a major disaster. The technicalities of these schemes can be found in more detail on the above-mentioned website, and checking out which state options are available is often a good idea instead of immediately looking for private options.

Company work insurance policies for the self employed

If you cause damage to a third person as part of your self-employed activity, you would be in trouble without a business liability insurance. A liability insurance is indispensable for enterprises, which have personal customer contact in their industry. However, companies that work with personal data, or pharmaceutical companies with consulting services, for example, should also take out business liability insurance. The various insurance companies offer very different services in some cases: Therefore, when choosing your business liability insurance, make sure that the service package matches the risks customary in your industry.

Business liability insurance

This insurance is essential to protect your business from liability claims. This insurance is sometimes shortened to GL for general liability insurance. It is really important that you know what is covered and what is not under a business liability insurance, so make sure you take the time to inform yourself, or consult an insurance expert to make sure you won’t be in for a nasty surprise should you need your insurance to jump in.

Most insurances will cover the basics, and depending on your budget, you can insure against most things. Basic protection should include protection from claims for bodily injury, property damage, and personal injury, among others. Generally speaking, employee injuries, professional liability, intentional acts, auto-related coverage, as well as punitive damage, are not covered.

Legal protection insurance

Legal help can be very expensive – there is a reason why lawyers are usually well off! Trying to face a legal case without a lawyer is daunting, and not advised, meaning that many people do not follow up on small cases. As a business you may not have a choice in the matter, meaning that insuring for legal counsel is a good idea.

Other business insurances for the self-employed…

This list of recommended insurances is by no means exhaustive. It is always a good idea to stay up to date with what types of insurances are out there, and also what legal changes are happening on a local, state, and federal level – this could affect your liability.

Taking out insurance for the self-employed

Tip

Self-employed persons should check at regular intervals whether all their insurance policies are really necessary, and if they are, whether they are up to date, and offer the best deal. On the other hand, after an expansion of business activities, it may also be necessary to take out new policies or increase the sums insured. If operational changes lead to a changed risk situation, you should also inform the insurance companies immediately.

You should always comply with the conditions for receiving benefits laid down in the insurance contract. Otherwise, the insurer may refuse to assume the costs in the event of a claim. It is also advisable to regularly compare the costs and benefits of existing insurance policies with offers of other policies. In this way, the costs can often be reduced while the insurance benefits remain the same.

Summary

Self-employed business people should decide which insurances are necessary for them and their company with particular regard to their industry. The premiums for these insurances are often underestimated, but should be included in your financial and business plans. Above all, it is important to avoid unnecessary costs immediately after the establishment, and not to take out too long-term insurances. However, certain personal and company insurance policies are indispensable in order to be protected in the event of a claim. You should also regularly carry out a cost-benefit comparison – depending on the size of the company and activity, this can save several hundred to over a thousand dollars annually.

Click here for important legal disclaimers.

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