The Guide to Buying Disability Insurance for Self Employed People
Purchasing disability insurance for self employed individuals can be a challenge.
You run a successful business. For most individuals, this means you probably have a few employees, maybe some inventory, or intellectual property. A disability might destroy your revenue and end all the hard work you’ve put in over the years.
The simplest way to protect against this potential situation is to purchase individual disability insurance. Disability insurance for self-employed people can cover your personal needs, or if you’re in a situation where you have overhead or a partner, it can protect your business interest.
But, you will likely have a few issues. Disability insurance carriers tend not to like covering self-employed people. The best disability insurance for self-employed people might not be attainable if you’re not looking at the right carriers.
If you work for a company or have a traditional profession, such as a physician or certified public account, your underwriting for a disability insurance policy will be fairly straightforward.
If you are one of the millions of business owners who do not fit this mold, then you’re in for an interesting ride, buying the best disability insurance for self-employed people.
Nearly every carrier will ask you a host of intrusive questions. They normally start with ones like this:
- Are you working from home?
- What was your net income over the last 2 years?
- Do you have employees?
- Are you a new business?
Your answers to these questions can dictate your elimination period, benefit length, and even occupation class. Your primary carrier may also choose not to offer you adequate coverage.
Primary Self Employed Disability Insurance Plans
Your first goal should be to find a long-term non-cancellable disability insurance plan. As an independent insurance broker, our process is simple. We first gather basic information (including health and income information) about you and your business. From there, we can submit this to several carriers and see what offers may be available. Our key carriers for primary disability insurance cover are:
- Assurity Life Insurance
- Illinois Mutual
- Mutual of Omaha
- Ohio National
- The Standard
These carriers are the top of the line providers for the best disability insurance for self-employed individuals.
Once we secure primary coverage, it may make sense to look for additional coverage. If you have a very successful business, business partners, or substantial overhead, secure additional disability insurance. Getting disability insurance for self-employed individuals can be challenging, however, it is very important if you fit that category. Even if you have a primary plan in place, it may not offer enough coverage.
A supplemental plan can fill this gap. As an agent for Petersen International, we can consider supplemental coverage from Lloyd’s of London. A supplemental plan is a secondary policy that can offer higher coverage amounts, based on a maximum allowable percentage of your monthly income. The percent amount is 65% of monthly income.
A typical disability insurance policy from a traditional carrier will normally cap out at around 20k per month in benefits. Purchasing a supplemental policy from Lloyd’s can push this amount north of 100k per month.
For high-income earners looking for substantial paycheck protection, nothing will protect your family and lifestyle like a policy from Lloyd’s.
Underwriting a Supplemental Disability Insurance Policy
A traditional disability insurance policy will have several hoops to jump through prior to approval.
Besides all questions outlined above, the best disability policy for self-employed individuals will also require a physical exam, comprehensive financials, and a detailed explanation of your business model.
Once you have a primary plan in place, if you act quickly, a supplemental plan will be the easiest insurance policy you can purchase.
If you apply within 90 days of getting your primary plan in force, you may not have to take an additional exam or provide many of the additional requirements outlined above.
Lloyd’s of London will auto-issue a supplemental policy upon you placing in force a primary disability insurance plan if it is bought through a major carrier, such as Guardian (Berkshire), Principal, or The Standard.
The Basics of Getting Disability Insurance for Self Employed People
The first thing to determine is how much coverage you will need. From there, you will need to determine the percentage of your current monthly income for which you would like to apply. Most self-employed individuals apply for the maximum since any loss of income is likely to be catastrophic.
This is often where we run into a major issue. For most business owners, the write-offs are substantial and many look to pay as little in tax as possible. Many business owners want to show as little income as is legal and are perfectly happy operating with a balance sheet that reflects relatively little income. Just like procuring a mortgage, this can hurt the self-employed disability shopper.
Carriers will want to look at tax returns, monthly tax stubs, and audited profit and loss statements from your CPA. The carrier must establish an income stream. If that income stream is being reduced due to write-offs, then it can disallow the small business owner from purchasing maximum coverage.
If you have a capital-intensive business, like a dentist or an owner/operator truck driver, then you can look at business overhead expense insurance to offset any personal loss of coverage.
From there, we will submit a preliminary application or an indication of interest to the carriers and see who might make us an offer. We will review the potential offers and then submit a formal application to a single carrier.
There will also be a non-invasive medical exam. This exam is done at your home or office and rarely incurs any costs to you. The carrier may also request medical records.
In Conclusion-Disability Insurance for Self Employed Individuals
Disability insurance for self-employed individuals is critical. Being self-employed entails an enormous risk/reward opportunity. Not protecting your income or your business can be catastrophic should a disability prevent you from participating in your business growth.
Don’t let a previous decline or a sub-optimal offer derail you from securing what might be the most important insurance you’ll likely purchase. The best disability insurance for self-employed individuals is obtainable.
Start the Process Today!
Use the form to the left and submit your request. You can feel free to call us direct as well. Our toll-free number is 888-636-2310.
We look forward to hearing from you.