What You Need to Know About Self-Employed Insurance

Facebook founder Mark Zuckerberg made headlines when he shared that he would be taking a two-month paternity leave. Given Facebook’s generous employee benefits, which frequently land the company on Best Place to Work lists, it makes sense that Zuck would take partial advantage of the social network’s four months’ paid leave for new parents, as well as his company’s holistic wellness program to ensure the best care for his and Priscilla’s children.

This brings us to a burning question: What kind of protection is available to the rest of us nonbillionaires? More specifically, what kind of self-employed insurance is available to individuals whose enterprises, unlike Facebook, have yet to enter the Fortune 500?

This question is particularly important to me. I became a freelancer a few years ago, and I felt a bit nervous about how I would protect myself in case of an emergency.

After some research, I discovered solutions that were not only helpful to freelancers, but that would also guide anyone who works part-time — such as caregivers, baristas, university students — or those with jobs that do not provide benefits.

I spent weeks thinking about where I was in my life, to whom I was accountable, and what I would I do if the worst happened.

By “the worst,” I mean sickness, a root canal, or God forbid, death. I needed to consider all necessary benefits, as I would have to provide them on my own, without the support of a traditional employer.

Different Types of Self-Employed Insurance and Benefits

In a two-week span, I found information on the following self-employed insurance needs, as well as other financial protections you might want to have in place.

Health Insurance

This is still accessible through the Affordable Care Act (ACA, sometimes referred to as Obamacare). Some states have their marketplaces, but you can find a federally run Health Insurance Marketplace through the ACA website.

If you leave traditional employment to become a freelancer, you also qualify for a Special Enrollment Period. This way, you can sign up for ACA coverage without having to wait until the annual Open Enrollment Period.

Dental Insurance

Each state is different, but I personally have access to dental insurance as part of my benefits. Be aware that if you want to sign up for a dental plan through the ACA, you have to purchase one at the same time that you sign up for health care. If you can’t afford both, consider looking for deals via dentistry schools or through Groupon.

Life Insurance

I would have some family obligations that would need to be covered in the event of my untimely death. As such, I decided to take out a life insurance policy that should cover my outstanding debt and expenses in the event that something happened to me.

Retirement Savings

While this isn’t insurance, I found that it’s relatively simple for self-employed people to sign up for a Roth IRA. A Roth IRA is a retirement plan that you fund with income that has already been taxed.

The great thing about a Roth is that when it’s time for you to retire, you can withdraw your money tax-free.

There’s also a variety of other options, like a defined benefit plan a Simplified Employee Pension, available to self-employed individuals.

My Self-Employed Insurance Calculations

As an example to other self-employed individuals, here’s how I assessed my insurance needs for the coming year:

• Income: I anticipated an increase in my income during the coming year, so I adjusted my yearly budget to accommodate an uptick in projects.
• Dependents: I don’t have children, but I do think about my mom when considering coverage. She would receive my benefits if I die.
• Debt: I have some, but I am consistently working toward paying it off.
• Future Health Choices: If I start a family or get ill, I need to think of the best options. This will affect which health insurance option I purchase.
• My Property: I owe a small mortgage.

Figuring Out Your Self-Employed Insurance Needs

Your income, dependents, debt, health, and property should be part of your insurance calculations.

“Every family has a different financial need, and each situation should be evaluated accordingly,” says certified public accountant Logan Howard.

“For example, I am a self-employed business owner with no kids, and my wife works full time. As such, I don’t have any life insurance because I have enough assets. That combined with the fact that my wife is employed means she would be okay were something to happen to me.”

“It boils down to assessing your own economic needs, your lifestyle, and your assets,” Howard adds. “Everyone’s respective situation is different.”

As such, avoid any rule of thumb indicators, such as getting coverage that’s 10 to 12 times your annual income. Instead, look for a policy that assesses that hypothetical, if bleak, situation that you pass unexpectedly. An honest assessment of your respective financial earnings and assets is more helpful in determining the value of your policy.

Final Thoughts

For me, once I examined my yearly salary and savings, I ended up with a life insurance policy that’s worth around $1 million. This didn’t include the amount of coverage that I’m getting for health, dental, and home insurance.

I have no plans to shuffle off this mortal coil anytime soon. However, I have peace of mind knowing that things will be taken care of in the unfortunate event that I do.

Additional reporting by Connor Beckett McInerney.