February 18,
2019 4 min read
Working for yourself or running your own
business usually comes with a multitude of perks and benefits --
flexible work schedules, the joy of being your own boss, the ability to explore
and bring to fruition your creative passions and more. In many cases,
working remotely can also be an option, allowing entrepreneurs to choose when
and where they work. What this setup lacks, though, is important protections
and financial security typically offered by traditional employers. Instead,
freelancers and contract workers must handle the responsibilities of purchasing
their own health insurance plans, setting up and managing their retirement
funds, and working without paid vacation or sick leave.
In today’s tight labor market, many
traditional employees are expecting, and receiving, higher
salaries and better benefits. But what happens when you are the employee and the
employer? Whether you’re a freelancer with 10 different gigs, a self-employed
proprietor starting out with your first endeavor or an established
entrepreneur running a small business, you likely won’t have access to many of
the benefits that other workers may take for granted. One of the most important
benefits you’re missing out on? Disability protection.
People, especially young people, like to think
that they are invincible. While we know this isn’t actually the case, those in
good health tend to underestimate their chances of experiencing a severe
disability. While life, car and home insurances are often purchased without
much thought -- even if they’re never used -- understanding how vital
disability coverage is can be more difficult, and many people hesitate to
purchase it. In fact, employer-provided or not, only about one in three
workers have adequate disability protection.
The odds that you will need this help may
surprise you. The Social Security Administration (SSA) projects that one in four 20-year-olds will
be disabled before they turn 67. And if you experience an injury or illness
that puts you out of work, you may have few resources available to help protect
your greatest assets -- especially if you’re trying to run your own business or
supporting yourself through uncertain and sometimes unstable gigs.
According to the Federal Reserve Board’s 2017 survey regarding
household economics, more than one-fifth of Americans can’t pay all their
monthly bills in full, and nearly half don’t have enough money set aside to
cover a mere $400 emergency expense. This means that in the event of a serious
illness or injury, a self-employed adult could easily slip into poverty, have
to declare foreclosure on their home or take other drastic measures. Beyond
that, a small business CEO who can’t come into work can spell the end of the
entire company.
While some people choose to purchase their own
long-term disability (LTD) insurance plans to cover themselves for these
scenarios, that can be an added cost that non-traditional workers can’t afford.
On average, LTD plans cost between 1-3 percent of an individual’s annual
salary. In addition, older individuals, smokers and those with “risky”
occupations typically are offered more expensive policies.
The good news is, the federal government
provides a safety net for all entrepreneurs and freelancers who keep current
with their FICA taxes: the Social Security Disability
Insurance (SSDI) program. SSDI is an income replacement
insurance for former workers with disabilities, overseen by the SSA. It’s
versatile and available to everyone who meets the requirements, no matter how
many companies they are employed by. Small businesses can call upon programs
like Extended Benefits, which
is free to all employers without private disability coverage, to provide this
valuable resource for their workers to utilize in the event of a disability.
Typically, to be covered for SSDI, workers
must have paid FICA payroll or self-employment taxes for five out of the last
10 years. Work history, education, age and mental or physical conditions can
all impact the SSDI process and its outcome, but the bottom line is, this
benefit is available and already waiting for you, no matter your financial
resources or whether you have access to traditional benefits.
No one wants to think about something bad
happening to them, such as a health emergency or disability, or a threat to
their financial and physical property. After the unthinkable happens, those
entrepreneurs who choose to access disability protection can discover a silver
lining while going through a very difficult time. Are you an entrepreneur who
is prepared for the unthinkable?
https://www.entrepreneur.com/article/327665
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