How To Apply For Disability Insurance
You will be assessed in a couple ways as you apply for disability insurance. Be ready to provide documentation in support:
Starting A Disability Claim If You’re Self
In order to file any type of disability claim through the SSA, you must fill out an application and provide medical documentation of your medical condition that makes you unable to work. You can submit your application online , or you can visit your local SSA office and fill out an application there. In addition to any medical records that you can provide to the SSA, you typically must sign release forms to allow the SSA to request additional records that they need to review your claim. You’ll also need to submit your past tax returns because you’re self-employed. If you need help applying and gathering records, you can contact a disability lawyer or advocate for assistance.
What You Need To Know About Disability Benefits For The Self
Saving for that rainy day can make a huge difference in your life as well as in the lives of the people who matter to you most. As a sole- entrepreneur, disability insurance will protect you and your income in case you are injured and are unable to work. Given that youre self-employed, you likely dont fall under the Family Medical Leave Act. Understanding the difference between fmla and short term disability insurance is important when deciding how best to cover yourself and your family.
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Talk With An Experienced Disability Benefits Attorney
Being self-employed doesnt mean that you are out of luck if you become disabled. You may be eligible for one or both types of Social Security disability benefits, depending on your income and work history. In addition, if you have purchased a LTD policy, you may also receive monthly payments from your insurance company.Bross & Frankel represents clients throughout New Jersey and Pennsylvania who are unable to work due to a disability. We are experienced, compassionate, and knowledgeable. Contact our office today at 856-795-8800 or online to schedule a free disability claim review with a disability attorney.
An Attorney Can Help You Get The Compensation You Deserve
If youve been self-employed, and qualify for SSDI benefits due to an injury or illness, an experienced disability benefits attorney can help you receive the compensation you deserve. To learn more, contact the Injury & Disability Law Center by clicking the Live Chat button on this page.
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The Definition Of Disability
This is the most important factor to consider when shopping for long term disability insurance. This will determine how much, and even if, you collect benefits following an injury or illness.
A policyâs definition of disability is based on your capacity to work. Maybe youâre unable to work in your chosen profession, but can do other work. A disability may allow you to work in a reduced capacity. Serious ailments can prevent you from working in any job.
To collect on a claim, you must meet the policyâs definition of disability. This can vary greatly by company and policy. The broader the definition, the more insurance will cost.
How Much To Expect In Benefits
This will be dependent on several factors. First and foremost, it will depend on the type of coverage you are on. As earlier mentioned, there are two types of disability insurance for both the employed and the self-employed namely, long-term disability insurance and short-term disability insurance.
Additionally, there are other factors such as your age at the time of the application, your annual income, and your health status.
Now, this is what most insurance companies wont tell you. Your pre-existing medical conditions will not be covered by the insurer. Its therefore important to ensure that such information is disclosed before you can apply for disability insurance.
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Q: What If I Can’t Find An Std Policy That Fits My Budget And Requirements
In this rare situation, financial experts often recommend the same financial safety net of a savings worth at least three to six months’ salary. If you find yourself pregnant and without adequate savings or an STD policy, explore your financial options as soon as possible if you’re worried about paying the bills while taking time off to heal and bond with your newborn.
Policy Features On Self
Choosing to include or exclude various features of your policy will influence the price a great deal.
Here are a few of the features which will most dramatically affect your monthly premiums:
1. Elimination Period This is the time it will take from when you first become disabled to when the policy will kick in. Shorter elimination periods such as accident cover starting at zero days, and sickness payments kicking in after 7-days will cost more than a prolonged period of 90-days.
If you can support yourself for 3-months, then you can save a lot on your yearly premium costs.
2. Benefit Amount Of course, higher payouts will attract a more substantial premium. Calculating the bare minimum monthly payment you require to live will prevent you from paying for unnecessary cover.
3. Benefit Period Covers the amount of time you will be receiving payments. Naturally, a shorter period of 3-months will cost a lot less than a policy which pays out for 24-months.
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What Is The Difference Between Short
There are two types of disability insurance: short-term disability and long-term disability. Long-term disability insurance may have a waiting periodalso called the elimination periodof several weeks to several months, with benefits lasting from a few years to retirement. Short-term disability insurance may have a waiting period of zero to two weeks, with benefits lasting up to two years.
While long-term disability insurance with benefits lasting until retirement may offer the ultimate protection, you may want to protect yourself with a short-term policy, too. Typically, you may pay higher premiums for shorter waiting periods and a longer benefits payout period.
For an extra fee, you may also look at a noncancelable policywhich means the insurance company cant cancel the policy for any reason except for not paying the premiums. Another policy option, guaranteed renewable, also means the provider cant cancel your policy, but the insurance company may increase premiums for a group of insured folks .
You may also pay more for extra riders, which may boost your disability coverage like cost of living adjustments , residual benefit or partial disability, the return of premiums for no claims, waiver of premium for disability, and more.
Protection For Your Business
Protecting your business means purchasing a policy that is meant to pay the business expenses should you, the owner, become disabled.
This is where a business overhead expense policy comes into play.
A BOE policy reimburses the business for expenses incurred while the business owner is disabled. The expenses covered by a typical business overhead expense policy are normally those that are deductible for federal tax purposes.
Examples of such expenses would include the mortgage or rent, salaries, utilities, and some types of insurance, such as malpractice or liability.
If you have a business that incurs consistent and substantial costs to operate, having a BOE policy will ensure that there is a business to return to after youve recovered from a disability.
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Are Disability Insurance Benefits Taxable For Self
If you pay for your own disability insurance , the benefits that you receive as a result of a disability insurance claim are not taxable. This means that self-employed individuals cannot be taxed on their disability insurance benefits as they are on their regular earnings.
As a reminder, please always consult with a tax professional regarding important tax implications.
Is Long Term Disability Insurance Worth It
We definitely think long term disability insurance for self employed workers is worth it. You can expect to pay 1 4% of your income towards your insurance premium on average. While you might not want to pay the premium now, you will be glad you did and that your income is protected if you become disabled and are unable to work. Paying 1 – 4% in premiums now is better than losing 100% of your income down the road.
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How Disability Insurers Determine Your Income
The premium you pay for and the benefits you receive will be based in part on your income. A key part of the underwriting process when you apply for coverage is determining how much you earn.
Determining the correct amount of coverage you qualify for is done through the process of financial underwriting. This is done largely to assess a personâs need for coverage and to avoid overpaying a claim if he or she becomes partially or completely disabled.
An underwriter will evaluate your earned income, unearned income, net worth, and even your bankruptcy history, if applicable. You will have to provide the underwriter with your individual tax returns and business tax forms.
For underwriting purposes, income is earned if it stops or would be significantly reduced because of a disability. Therefore, investment or business income that doesnât require work on your part will not be factored into your financial underwriting.
Disability Insurance For Self
Being your own boss means you have many responsibilities. It also means that your business would suffer if you had to take a leave from working. That is why disability insurance is crucial for self-employed workers.
Working for yourself has many perks, but access to group disability insurance is not one of them. But that does not mean self-employed workers need disability insurance any less than traditional employees.
Ask yourself: How would you support your family if a disability prevents you from working for several months? If you are severely injured or seriously ill, disability insurance for self employed workers may prove a lifesaver.
It can step in to help you cover your expenses and keep your business afloat while you recover.
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Disability Insurance For Freelancers And Independent Contractors
Many people derive some or all of their income through freelance or contract work. In many cases, these workers do not own a business that is its own legal entity. At the same time, they are not legal employees of a company. In today’s gig economy, this includes freelance writers/journalists, artists, personal trainers, computer programmers, data entry workers, and people who drive for rideshare services like Uber or Lyft.
If you earn income through freelance or contract work, you can qualify for disability insurance. As with all business owners at risk of losing some or all of their income due to illness or injury, you should strongly consider buying disability coverage.
If youâre a new freelancer, you will probably have to wait a few years to qualify for disability insurance. Most insurers will want to see evidence of at least two years of freelance income before agreeing to cover you.
Determining how much in benefits freelancers can qualify for is similar to financial underwriting for sole proprietors. Insurers will review tax returns over a two to three-year period to determine your average annual income, then base your benefit on that amount.
Freelancers who buy disability coverage are getting personal coverage. This means you cannot consider your premiums a business expense for tax purposes. That also, means, however, that any benefits you receive will be tax-free.
How Much You Earn Matters
How much disability benefits you can buy depends on how much you earn. The more you earn, the higher the benefit you can get. Salaried employees can easily find their earned income on their T4 slips.
However, earned income is harder to calculate for self-employed workers. Do you include dividends? What if your income is inconsistent year over year? These are the questions that the insurance company would need to know to determine how much disability coverage you can buy.
The earned income of a sole proprietor is usually 100% of the businesss net income after deducting business expenses.
The net income of a partnership is allocated to the partners based on their percentage ownership, as declared on their income tax returns.
Incorporated shareholders can include their salary, fees, bonuses, and commissions, as well as their portion of the corporations net income before taxes. Because dividends can be paid from prior years retained earnings, theyre irrelevant in determining your earned income.
For all of the above, you can increase your net income by 20% to determine your maximum monthly benefit.
For example, if you earned $100,000, you can increase this to $120,000 and buy $5,925 in monthly benefits instead of $5,200.
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How Much Will I Get In Benefits
Your disability amount is based on your reported earnings , not on your work credits. Work credits simply allow you to qualify for benefits. They do not determine the amount of those benefits.
Your actual benefits amounts are computed based on what the SSA calls your “average indexed monthly earnings” . Your AIME is calculated using a highly complex formula that takes into account factors such as:
- the average wage earned by workers in your indexing year,
- the average wage of workers in your computation base years, and
- your actual dollar amount earned.
If you want to learn more about how your benefits are calculated, see our article on how much you can get in SSD benefits.
Primary Self Employed Disability Insurance Plans
Your first goal should be to find an individual disability insurance plan. This policy is to protect your family and help you maintain your lifestyle should you become sick or injured and unable to work.
As an independent insurance broker, our process is simple and built around the acronym K.E.E.P.
First, we help you understand how a disability insurance policy is built and what options might be available. Unlike traditional professions, disability insurance for self employed individuals has a few more moving parts. You may qualify for less or more coverage than someone with your same earnings who works for a company. For this reason, it is important to know whats important to you, and what you may be eligible for.
Well give you a solid knowledge base to help you make your decision.
Now that youre confident in knowing the ins and outs of a disability insurance policy, its time to evaluate your options.
As mentioned earlier, disability for self employed people takes into account a number of different factors. There is no such thing as the best disability insurance for self-employed people. The best policy is the one that fits your needs and goals.
Once we understand whats important to you, well look at all of the major carriers that will consider the plan design that youve chosen.
These carriers are the top of the line providers for the best disability insurance for self employed individuals.
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Protect Yourself With Self
Being your own boss means having to think of and plan for everything, including your own absence. Disability insurance for the self-employed or sole proprietor is doubly important because smaller companies have fewer backup personnel should someone get sick. Buying a personal disability insurance policy allows your company to carry on financially if a health disaster strikes.
While its hard to plan for the unknown, its easy to get help planning aspects of your business under your immediate control. ZenBusiness can assist you in everything from customizable business plan templates to state tax or compliance issues. Let ZenBusiness help you get your companys paperwork in perfect order so that when it comes time to present your documents to a potential disability insurer, youll be more than ready.
Types Of Disability Insurance For Self Employed Workers
You can get short term or long term disability insurance.
A short term policy benefit period typically spans from 90 to 180 days. Long term disability coverage has short term disability insurance built in the short term kicks in for a specific period while long term disability approval is pending.
In other words, short term is the first step in the long term policy. The waiting period for approval for long term disability benefits can be several months before benefits begin.
An insurance company may pay 80% of your salary during the short term period, and 50-60% during the long term period. You are paid in monthly benefits.
You can get coverage from the government through the Social Security Administration or you can get coverage from private disability insurance companies.
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Does This Apply To Self
There are no separate short-term and long-term disability options for individual policies.
When choosing a policy, you can pick the waiting period, referring to the time before your policy kicks in. The longer the waiting period, the lower the premiums typically are. The insured usually determines the waiting period based on cost, benefits, and financial situation. Note there may be an elimination period or minimum waiting period before you can start receiving your monthly benefit to ensure no direct offset with other benefits are being received .
You can also choose the benefit period the max amount of time the benefit will pay you. This will determine how long you will get coverage. We almost always recommend going with the longest benefit period you can . If something happens and youre unable to work for years, youll be glad you have some financial stability and protection.
Having an extended benefit period offers coverage most similar to long-term disability. Note that the longer this period is, the more expensive your premiums will be.