The 6 Best Disability Insurance for Self-Employed

How to find the right disability insurance as a self-employed worker

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When you’re self-employed, you often wear many hats: account payable/receivable, payroll, production, and more. If you don’t do the work, it doesn’t get done. So if you were to experience an illness, injury, or another life event that keeps you from working, you are significantly impacted. Because an estimated 25% of today’s 20-year-olds will be disabled before they reach age 67, according to the Social Security Administration, it’s essential to have a financial plan should you become disabled. 

One of the ways self-employed individuals can protect themselves financially is through disability insurance. Both short- and long-term disability policies are available but can be more challenging to obtain as you will need to show records of a consistent income and may need more funds to cover your business operating expenses. 

We’ve compiled a list of some of the best disability insurance companies that offer self-employed individuals policies. Considering factors like elimination periods, financial stability ratings, percent of income paid, and whether the company offers special incentives or policies for the self-employed, keep reading to find out the best disability insurance for the self-employed.

The 6 Best Disability Insurance for Self-Employed of 2021

The 6 Best Disability Insurance for Self-Employed
The 6 Best Disability Insurance for Self-Employed

Best Overall : Guardian

Guardian

Guardian 

Why we chose it: Guardian offers policies specific to the self-employed, a fast and thorough quote tool, strong financial ratings, and both short- and long-term policies.

What We Like
  • Job-specific quotes are available within seconds

  • Add-on policies beneficial for self-employed

  • Lots of education on how to use their policies when self-employed

What We Don't Like
  • Must contact a representative if you are a laborer/blue-collar worker

  • Cannot purchase your policy online; must purchase through a financial advisor

  • Did not list elimination periods for short-term disability

Guardian offers a lot of education and self-employed-specific policies, plus a great quote tool that all helped to earn the company our top spot. 

The quote tool asks questions about your gender, age, occupation, state you live in, and yearly income (if you want to disclose it). For a 45-year old male business owner working in California who earns $50,000 a year, we were quoted an estimated monthly cost of $179 for a $2,500 monthly benefit. This reflects the maximum benefit a person could qualify for from Guardian. We did note that we were instructed to call a financial representative if we filled out the “blue-collar worker/laborer” option. 

In addition to the ability to receive a quick quote estimate for coverage, Guardian offers several add-ons that benefit self-employed individuals. These include partial disability benefits if you can still work, but your productivity is reduced due to illness or injury; a Cost of Living adjustment that can help provide additional benefit payouts by accounting for inflation; or a policy that offers up to $1,000 a month to help cover undergraduate student loan expenses. This can be very helpful if you are in a medical profession and often have to pay for student loan expenses over a long time period. Once you’ve completed the quote tool and selected any add-ons, you can fill out your contact information to hear from a Guardian financial representative.

We saw elimination periods for their long-term disability policy that ranged from 30 to 720 days and coverage lasting up to 10 years of age 65. For their short-term policies, we saw benefit periods between 13 and 26 weeks. They did not list their elimination periods for their policies. 

Guardian offers its policies in all 50 states and the District of Columbia. They also have the highest possible rating from rating agency AM Best of A++ (Superior).

Best Budget : Illinois Mutual

Illinois Mutual

Illinois Mutual 

Why we chose it: Illinois Mutual quoted premiums that were sometimes as much as $50 lower for different occupation classes, plus offered added benefits (such as business expense protection) to help the self-employed.

What We Like
  • Many premiums were $50+ lower than other companies

  • Online quote tool was easy to use and featured many rider options

What We Don't Like
  • Policies aren’t offered in Alaska, California, Hawaii, New York, or D.C.

  • Must purchase policy through an advisor

Illinois Mutual earned top marks from us for its low-quoted premiums, easy-to-understand policies, and additional benefits geared toward the self-employed who own their own businesses. Another unique aspect is the ability to extend the benefit period to age 67—many policies we reviewed only went to age 65. We also saw anywhere from 2 to 5 year benefit periods as well. 

Illinois Mutual offers an online quote tool that generates fast results for monthly premiums. For a 45-year old non-smoking male in Arizona with an annual income of $50,000 who works as a professional, we were quoted a premium of $55.53 for a $2,000 monthly benefit. To increase the benefit to $2,500 a month, the premium was $86.15. Both of these quotes were sometimes as much as $50 cheaper per month than some of the other policies we considered. This policy had an elimination period of 30 days, but we saw some options that extended up to 90 days. 

Rider options included an own-occupation rider, cost of living adjustment rider, guaranteed insurability rider, and a retroactive injury rider. 

In addition to being friendly on the wallet, Illinois Mutual also offered several perks to benefit the self-employed. Specifically, they have a PERKs program for business owners, which stands for Personal Paycheck Coverage, Elective Benefit Periods, Reimbursable Business Expenses, and Key discounts (5%) if a person wishes to purchase a disability and business expense plan. 

Unfortunately, Illinois Mutual doesn’t offer its policies in all states; you cannot purchase a policy if you live in Alaska, Hawaii, California, New York, or the District of Columbia. The company has an AM Best rating of A- (Excellent) for financial strength.

Best Freelance/Gig Workers : Breeze

Breeze

Breeze 

Why we chose it: Breeze offers a fast online quote process that includes many freelance and gig professions, including rideshare drivers.

What We Like
  • Policies for those in gig, freelance, and non-traditional occupations (such as entrepreneurs)

  • Easy online application tool with instant approval for low-risk applicants

What We Don't Like
  • No salespeople, so you’ll have to know what coverage you want

  • Not offered in New York State

Like many in the freelance and gig economies, Breeze operates on a completely online platform. There are no salespeople involved in its online quote process, and their policies cater to freelance and gig workers, both in their quote search tool and in the riders and additional benefits they offer. As long as you’ve taken the time to determine what you want from your disability insurance, then you won’t miss a salesperson. 

Breeze utilizes an online quote tool to enter your birthday, gender, nicotine use, and what type of employee you are. This includes “independent contractor: I work as a 1099 independent contractor or am a freelancer” as well as “business owner: I am an owner or partner in a business.” We clicked the independent contractor button and were asked to further categorize our job: professional, technical, light labor (such as an auto mechanic or carpenter), or labor (such as rideshare drivers or roofers). 

For a 40-year old female who works light labor and makes $60,000 a year, Breeze recommended a policy that had a 10-year benefit period and a 90-day elimination period with monthly benefits of $1,200 at a cost of $47 a month. Increasing coverage to $2,300 a month would cost about $90. 

Before proceeding to the online application process, we were allowed to customize the coverage. Customizations included increasing/decreasing the coverage, changing the benefit and elimination periods, or adding on optional riders. Examples included an automatic benefit increase rider, guaranteed insurability rider, residual disability benefit rider, and a supplemental disability insurance benefit rider (which would pay even if you receive benefits from Social Security or other organizations). 

Breeze offers disability insurance coverage in all states except New York State. Breeze’s policies are underwritten by Assurity (another company that made our list), which has an AM Best rating of A- (Excellent).

Best Short Waiting Period : Mutual of Omaha

Mutual of Omaha

Mutual of Omaha

Why we chose it: Mutual of Omaha offered waiting periods as low as 0 days as well as 7 and 14 days, where most companies utilize a 30-day waiting period.

What We Like
  • Short-term disability benefits can start right away in the case of injury

  • Waiting periods included 0, 7, and 14 days

What We Don't Like
  • No online quote tool must contact their brokers

  • Does not offer all disability products in California and New York

When you’re self-employed, waiting even 30 days to start receiving disability benefits can seem too long. If this is the case, Mutual of Omaha may be a good option for you as they offer elimination periods as short as 0 days for their short-term disability products. Most of the 0-day elimination policies are related to if you were to experience an accident. For sickness or illness, Mutual of Omaha advertised a 7-day elimination period. They also offer 14-day options as well as the more traditional 30, 60, and upwards. Their long-term disability elimination periods begin at 60 days.

We liked that Mutual of Omaha was very upfront with many of their terms when describing their short- and long-term policies, including explaining the maximum monthly base benefit and benefit periods. They issue disability policies from ages 18 to 61 although you can continue long-term disability coverage up until age 75 if you choose. 

Unfortunately, they do not have an online quote tool, so it was difficult to evaluate how their varying terms stacked up to the policy costs. You will need to contact an agent to find out how much you would expect to pay; however, it's beneficial to speak with someone because there are so many customizable options, benefits and riders that could be advantageous.  

Mutual of Omaha earned an AM Best rating of A+ (Superior), which speaks to the company’s financial strength. Unfortunately, they don’t offer all their disability products in California and New York state.

Best for High-Risk Occupational Class : Assurity

Assurity

 Assurity

Why we chose it: Assurity extends its disability benefits to workers in a variety of high-risk, self-employed categories, including manual laborers, electricians, and farmers.

What We Like
  • Extends policies to a variety of occupations considered higher-risk

  • Offers several base benefits and riders that benefit the self-employed

What We Don't Like
  • Quote tool does not work well for laborer occupations

  • Does not offer its products in New York State

We won’t sugarcoat it: If you are in a high-risk occupation class (such as manual labor), you’ll have greater trouble securing a disability policy. This comes down to risk: Because you are more likely to get injured on the job, the insurance company has a greater chance of having to pay out. Fortunately, companies like Assurity will extend disability benefits to skilled and unskilled manual occupations where workers are commonly self-employed, including farmer, plumber, electrician, painter, crane operator, beautician, and auto mechanic.

The company advertises its streamlined application process and guarantees to let you know within four days if you’re approved. The maximum benefit is 60% of your income up to $3,000 a month, and Assurity will issue policies for those ages 18 to age 59. They also offer a partial benefit if you are able to return to your work on a part-time basis. 

Assurity has an online quote tool that we found difficult to use when searching for a high-risk occupation. We tried different incomes, states, and labor positions, but were directed to contact an agent. However, they do advertise some of their rates, such as $40 a month for a 45-year-old electrician who earns $52,000 a year with a 2-year benefit period and a 90-day elimination period.  

Assurity also offers several key features that benefit the self-employed and high-risk worker. This includes benefits that pay for home modifications should you become injured and require special changes, coverage for vocational rehabilitation, and a waiver of premium once Assurity approves your claim. They also offer add-on riders for critical illness, catastrophic disability, and guaranteed insurability, which allows you to increase your premium without having to undergo a medical underwriting process. 

In terms of coverage, Assurity will not pay short-term disability benefits for a normal (uncomplicated) pregnancy. However, if you have pregnancy-related complications that keep you from your self-employed job, they will help pay for the accrued medical expenses. 

Assurity has an AM Best rating of A- (Excellent). This rating isn’t quite as high as some of the companies reviewed but does represent AM Best’s fourth-highest rating. Assurity provides disability insurance in all states except New York.

Best for Income Replacement : Northwestern Mutual

Northwestern Mutual

Northwestern Mutual

Why we chose it: Northwestern Mutual’s financial strength enables them to support disability policies that may pay up to 100% of your salary with fast underwriting times.

What We Like
  • Offer disability policies that may replace up to 100% of your salary

  • Streamlined underwriting decisions to 24 hours

  • Special policies for doctors, dentists, and other self-employed occupations

What We Don't Like
  • Must consult an advisor for a quote

  • Does not advertise terms, such as average elimination periods or policy length

Northwestern Mutual is a financially sound company that offers short- and long-term disability policies that are highly personalized. They advertise that they offer short-term disability coverage that pays between 50% and 100% of your salary. That kind of potential protection earned it our “Best for Income Replacement” honors. 

Also, many of the policies we reviewed do not provide disability coverage for higher-income individuals. Northwestern Mutual offers a “Medical Own-Occupation” policy that is specific to doctors and dentists, which caters to those who traditionally have higher incomes and may need partial to full benefits. The “own-occupation” part of the policy means the insurance company will pay you disability benefits if you can’t work in your specific occupation but could work in another capacity. 

Northwestern Mutual leans on its advisors, so they don’t offer quotes online or advertise their elimination periods. Their policies are also highly customized to the policyholder. The company advertises that they have policies for a wide range of employment types, from medical professionals to part-time workers. You’ll need to share your personal goals and budget with your advisor to determine how much coverage you may need. 

Having to consult an advisor doesn’t mean the approval process will be a lengthy one. In 2019, Northwestern Mutual accelerated its underwriting policies for disability products which reduced the company’s average underwriting times from 28 days to one day. 

Northwestern Mutual offers its policies in all 50 states and the District of Columbia. They also have an AM Best rating of A++ (Superior), which is the highest possible rating. This is especially good for income replacement because it provides peace of mind that your policy will be paid out. According to their website, they pay out more in individual disability insurance benefits than any other major insurance carrier.

Compare Providers

Best Disability Insurance for Self-Employed
Insurance Company Why We Picked It Elimination periods 
Guardian  Best Overall 30 to 720 days 
Illinois Mutual  Best Budget 30 up to 730 days 
Breeze Best for Freelance/Gig Workers 30 to 365 days 
Mutual of Omaha  Best for Short Waiting Period 0 to 365 days 
Assurity Best for High-Risk Occupational Class 30 to 365 days
Northwestern Mutual Best Income Replacement  Did not list 

FAQs

What Is the Difference Between Short-term and Long-term Disability Insurance?

Disability insurance is a protective policy that covers a portion of your income if you could not work in the short- or long-term. “Disabled” can have many definitions: Perhaps you experience an injury, pregnancy, or illness that prevents you from working for several weeks to months or you are diagnosed with a chronic illness that means you cannot work for the foreseeable future. Disability insurance covers each of these circumstances (and many more). 

Insurance companies sell both short- and long-term disability policies. 

Short-term disability: This insurance policy will typically cover up to 70% of your salary based on the policies we reviewed. The “short-term” portion reflects that you will likely be able to return to work within six months. 

Long-term disability insurance will cover a portion of your salary for up to several years after your disability occurs. Policies we reviewed usually covered anywhere from 40% to 70% of your salary. 

Both are options to ensure you would not experience financial difficulties were you to find yourself unable to work for a short- or long-term period. 


What Is Disability Insurance for Self-employed?

Self-employed individuals are dependent upon themselves to keep their businesses going; their efforts and work are what drives a business and their salary. If a self-employed individual doesn’t work, they do not make money. In the case of disability, the inability to work for months to years can be a significant financial blow as well as jeopardize their business. 

If you haven't saved sufficiently and find yourself unable to work, disability insurance can help provide a safety net where you can still receive some portion of your salary if you can’t work. It's also called “disability income insurance” because the policy protects your income so you can ideally pay your bills and keep your business afloat as you get better. 

Can You Go On Disability if You're Self-employed?

Being self-employed does not mean you aren’t vulnerable to life’s illnesses and injuries that can occur. As a result, you can purchase and qualify for disability insurance as a self-employed individual. 

Be aware that this process is often more difficult than if you were employed by a larger organization that offers disability benefits to its employees. For example, you may have to show proof in the form of tax returns that you have been self-employed for a certain time duration. You may also have to show how you arrive at your salary or your business expenses to secure a policy that will pay a large enough percentage of your income to be worthwhile. 

How Much Does Disability Insurance Cost?

Disability insurance costs have many variables including:

  • Policy type (short- versus long-term disability)
  • Percentage of income paid 
  • Elimination period 
  • Duration the policy pays 
  • Person’s income
  • Person’s occupation 

When an insurance company sells you a short- or long-term disability policy, they are essentially taking a risk that you will pay more in the policy than they will pay you should you become disabled. As a result, self-employed individuals with higher-risk occupations, higher incomes, or policies that pay a larger percentage of their income can expect to pay higher monthly premiums than those who don’t. 

How Much of Your Salary Will You Receive From Disability Insurance?

The percentage of your salary you will receive depends upon the policy you purchase. Disability insurance policies will pay a percentage of your income, which may be anywhere from 40% to 70% based on the policies we reviewed. According to the U.S. Bureau of Labor Statistics, the median salary replacement rate for a short-term disability policy is 60%. Of course, the higher the percentage the disability policy pays, the higher your monthly premium is likely to be. 

Keep in mind all the expenses affected if you were to become disabled as a self-employed individual. For example, when you own your own business, your home may be your office. Your utility payments, salaries paid to others, taxes, and more may also be in jeopardy if you were unable to work. As such, disability insurance is more than just the salary you pay yourself; it’s also about having enough funds to support your business expenses. 

How Quickly Will I Receive a Disability Payment? 

Most disability policies will have what’s known as an elimination or waiting period: the time period you must wait before your policy starts paying your benefits. In a traditional employer setting, an employer often requires that a person utilize their paid time off or sick leave before their disability benefits kick in. However, as a self-employed individual, you may or may not build paid time off into your salary. 

It’s important to review elimination periods when selecting a short- or long-term policy. For short-term policies, this may range from a week to six weeks or more. For long-term policies, we saw elimination periods that ranged from 30 days all the way up to 720 days. The longer an elimination period was, the less expensive the policy usually is. 

Once an elimination period is up (and you’ve filled out the necessary paperwork for your disability insurance), you can qualify for disability payments. The insurance company will usually pay these directly to you, often in the form of direct deposit. 

How We Chose the Best Disability Insurance for Self-Employed

To select the best disability insurance for self-employed individuals, we reviewed more than 20 companies that offered short- and long-term disability policies. Our focus was on companies that offered policies both short- and long-term disability policies to individuals (not just employers) and accepted those of all occupational classes. We considered ease of application, availability of self-employed friendly terms (like business expense riders and higher policy percentages), and availability of online quote tools or education. These insurance companies offered policies in at least 45 states so readers would have the broadest options in terms of coverage, and we looked for an AM Best rating of at least A- to ensure policies would be paid out.

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Article Sources
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