Important Insurance Issues for the Self-Employed (Part I)

Being your own boss offers a lot of advantages verses working for someone else. The freedom of setting your own hours working in a business you enjoy and having better financial opportunities is hard to beat. However, being self-employed also takes some adjusting, especially if you are not used to this change in lifestyle. Sometimes, freedom can be a double-edged sword with the temptation to use your free time in a less than productive fashion. Another adjustment self-employed and small businesspeople must make is in the area of insurance.

When working for an employer, most of your insurance needs are taken care of. Typically, an employer will offer a group health plan, short-term and long-term disability, and life insurance among others. When you are on your own, it is up to you to provide the necessary insurance coverage for you and your family. Here is a guide to some of the important insurance issues self-employed people need to deal with.

Health Insurance: Health coverage is usually the biggest issue a self-employed individual needs to deal with. When going from an employer to working on your own, there are many instances when individuals will need to come up with several hundred dollars a month out of pocket to continue providing health insurance for themselves and their family. While it may be tempting to stay on your former employer’s plan through COBRA, it is a good idea to shop around and find out the lowest cost coverage in your area. In addition, an independent insurance agent can be helpful in finding the right kind of health coverage for your individual circumstance.

Life Insurance: Life insurance is one of the most often overlooked insurance needs, particularly for those who are self-employed. While working for an employer, it is usually easy to purchase cheap term-life insurance for just a few dollars a paycheck, covering up to roughly 3 to 4 times your annual salary. What most people do not realize is that term-life insurance is very affordable when purchased directly as well. For example, an individual male in his mid-30s that is in relatively good health can usually purchase $250,000 to $500,000 of term-life insurance for less than a dollar a day. This is a small price to pay to keep your family covered in the event of a worst-case scenario.