6 Self-Employed Insurance Needs That People Often Forget
If you’re transitioning into freelancing, you’ll need to purchase new insurance policies and review your existing plans.
When I made the leap into full-time freelancing a few years back, one mission-critical thing I needed to look into was how to financially protect myself in case of the unexpected. While not the most exciting thing to think about, self-employed folks need to assess their insurance options. And while I had some existing insurance plans, I knew I had to purchase new policies and make tweaks to existing ones. Without insurance, I would be at risk for a financial ruin. Here are six essential types of insurance for self-employed people:
- Short-term disability
- Travel medical
1. Health Insurance
When you take the leap into self-employment, you need to take care of your health insurance straight away. Otherwise you risk paying a penalty. In 2016 and 2017, that penalty was 2.5 percent to your total household adjusted income, or a flat penalty of $695 per adult and $347.50 per child (maximum $2,085), whichever is higher.
As a freelancer, you’ll need to shop around for the insurance plan that works best for you. This includes taking a close look at all of the costs — not just the monthly premium. These costs range from prescription drugs to co-pays to lab work.
Beyond just having to pay a penalty, getting myself into crippling medical debt was a real concern. In fact, according to a joint survey conducted by the Kaiser Family Foundation and the New York Times, about one in five adults in the U.S. say that they or someone in their household has struggled with paying off medical debt in the past 12 months. And while health insurance doesn’t necessarily provide a total safeguard against medical debt, you would be paying a lot more out-of-pocket without it — plus the penalties!
2. Dental Insurance
While not legally mandatory, dental insurance could save you money down the road. It has an annual dollar maximum, which means there’s a cap as to how much the insurance company will pay each year. You’ll want to see if there’s a deductible, as well. Also look at which services are 100 percent covered, and which ones have a co-pay.
I did the math and figured out that my total monthly premiums for a year added up to two teeth cleanings and X-rays each year. If I ever needed more intensive dental work, it would save me some dough.
3. Short-Term Disability Insurance
Short-term disability insurance was something I hopped on earlier this year. If you suffer from an accident or get sick and can’t work, short-term disability pays a percentage of your income for a short period of time. Depending on your coverage, short-term disability will pay for anywhere from nine weeks to a year.
Right now, only five states and one territory provide — or require employers to provide — short-term disability: California, Hawaii, New York, New Jersey, Rhode Island, and Puerto Rico. Even then, the state regulations don’t always apply to freelancers. And while I live in Los Angeles, I wanted to look into short-term disability to supplement what I would receive from the state government.
I’m single and don’t have a second income to fall back on, so I knew I needed short-term disability insurance.
But after doing some searching online, I experienced sticker shock. I discovered that policies for someone in my age bracket cost $350! I finally landed on an affordable self-employed insurance plan through the Freelancers Union, and I now pay about $22 a month for $2,500 a month in coverage.
4. Renter’s Insurance
Renter’s insurance will replace any belongings that you lose due to a burglary, accident, or disaster. It usually also covers liability in the event that you accidentally damage someone else’s property, as well as the cost of having to stay elsewhere if you’re temporarily unable to stay in your apartment.
It typically covers belongings such as furniture, electronics, and clothes. However, if you work from home and want to cover business equipment, you’ll need to purchase a rider or add-on to cover business equipment.
5. Liability Insurance
Liability insurance can provide protection against high-cost lawsuits. Otherwise, you could end up in the poorhouse. There are several types of liability insurance.
General Liability Insurance
General liability insurance protects your business from third-party claims for bodily injury, associated medical costs, and damage to someone else’s property. This could protect your business if you’re, say . . . a personal trainer, event planner, or IT professional.
Professional Liability Insurance
Professional liability insurance is also known as errors and omissions insurance. It protects you and your business from claims that have to do with negligent performance of your professional services. This might come in handy if you run a service or advice-based business, such as a school psychology or landscape architecture practice.
Media Liability Insurance
This is another type of errors and omissions insurance. It’s designed to protect those who work in broadcast, publishing, journalism, advertising, and marketing against errors, invasion of privacy, copyright infringement, and plagiarism claims.
6. Travel Medical Insurance
If you’re a digital nomad and travel abroad quite frequently, then you’ll want to look into travel medical insurance. Many policies offer insurance for single trips, multiple trips, or long-term trips abroad. Note that travel medical insurance doesn’t replace regular health insurance. In fact, it usually requires that you have primary health insurance before you can purchase it.