Being Your Own Boss: Types of Self-Employment Insurance You Need

person with self-employment insurance visiting doctor

It’s no surprise that in today’s job market more and more people are upgrading from their dull nine to five to the freedom of freelance and self-employment. But of course, anything that sounds exciting comes with a risk, and self-employment is no exception. 

When you work for yourself you are your own boss, you get to decide how you work, when you work, and who’s on your team. Currently, there are 15 million self-employed professionals in the United States workforce today.

If you just became your own boss, you will need to change your insurance. Keep reading to learn more about the different kinds of self-employment insurance. 

Why You Need Self-Employment Insurance

You need health insurance, especially when you’re self-employed. You can even face a government penalty if you don’t have health insurance. But most importantly, accidents happen and if you are putting yourself and your wallet in danger if you’re not covered. 

Sure, having your own health insurance that’s not through a company will be an adjustment. You won’t share the costs of your insurance with your employer anymore and will have to pay for it all on your own. 

On the positive side, your health insurance is a tax deduction for the self-employed, and you can save even more money when you sign up for a high-deductible health plan (HDHP). Here are the different types of self-employment insurance available. 

Term Life Insurance

This insurance gives you life insurance coverage for a certain amount of time. If you die while covered, your family gets a payout from the policy. Here’s what you should keep in mind when you buy term life insurance. 

Your Life Insurance Policy Should Be 10–12 Times Your Annual Income

It’s hard to find out how much you make each year since you’re self-employed. Especially since no two years are the same. However, you can still get the average of your annual income from the past few years as a guide.

Another option is to make an educated guess on how much you think you’ll make this year. Then you can use that number to figure out how much life insurance you need. 

You want your life insurance policy to be about ten to twelve times more than your annual income, instead of a random number. This is a solid baseline for the amount you will need for your lost income. This amount will make sure your family is taken care of since you won’t be able to provide anymore. 

Buy A Policy That Lasts

Whatever policy you end up going with, you’ll want to make sure that it can last until either you become self-insured or your kids leave. There are some great term life insurance policies that cover anywhere from ten to thirty years.

It’s best to go with a fifteen to twenty-year term policy that is worth $500,000. If you consistently invest for two decades, then you should have enough money saved to be self-insured by the time your term ends.

You also will need to check your policy from time to time, as life happens. You want to make sure that you always have enough insurance that can cover your family in case something happens to you. 

Business Insurance

You could be a plumbing contractor or a freelance journalist, no matter what your source of self-employment is, there is some risk involved in your job.

You either have a risk of getting injured on your job or getting slapped with a lawsuit. No one is safe. 

If you are self-employed, you will want some sort of business insurance to cover you and the risks that happen with your job. Here’s more on the four main types of business insurance. 

General Liability Insurance

This insurance comes into play if let’s say someone slips and falls on the wet floor of your bakery, or you accidentally break a valuable piece of art during a house cleaning gig. This kind of liability coverage protects you from losing money if your customer or client tries to sue you. 

General liability can also cover you if you get sued for slander. This coverage can be a business owner’s policy or a stand-alone policy. 

Professional Liability Insurance

We all make mistakes, and no one is perfect, which is why professional liability insurance is key. This insurance is also known as omissions and errors insurance. This policy protects you if a client is harmed by the advice you give or service you provide.

General liability mainly protects against damages and physical injuries, while professional liability protects against financial loss. 

Business Owner’s Policy (BOP)

A Business Owner’s Policy is essentially like a general liability insurance policy on steroids. Here there’s a combination of several insurance coverages such as general liability coverage that’s in a convenient package at a rate that is reduced.

BOP could also include coverage that protects your equipment and business property so you can pay the bills if your business has to temporarily close. 

Workers’ Compensation

Worker’s compensation is required by law if you have any employees. If any of your employees get hurt at work, this compensation will cover all of their lost wages, medical and rehabilitation expenses. 

The type and cost of this insurance depend on the kind of work you do. So if you are an independent construction worker, you may not be eligible for BOP since your industry is considered to be at such a high risk. In that case, you are probably better off going with a general liability policy. 

Get Your Self-Employment Insurance Today

Now that you know about the different types of self-employment insurance available, find the policy that is right for you. You should reach out to an independent insurance agent to help you with this process. Be sure to discuss your insurance needs so you can get some quotes and see how much these policies will end up costing you. 

For more career advice and resources, check out our blog! 

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