How to Get Employee Benefits When You Are Self-Employed
Employment today is far from what it used to be, with the Pew Research Center reporting that there are around 14.6 million Americans who are self-employed. These business owners and their employees account for three out of 10 jobs in the United States.
As your own employer, you do not have subsidized employee benefits, so you have to create your own. This can mean spotty coverage with fewer available benefits or wildly expensive premiums that fall out of budget. You could decide to work for somebody else, but if you have a limited employment history, some companies may offer stricter terms or limited coverage that could make them unsuitable for you.
With some careful planning, you can purchase the right self-employed benefits package for you.
Table of Contents
- 1 Health Insurance Options for the Self-Employed
- 2 Disability Insurance for the Self-Employed
- 3 Self-Employed Retirement Plans
- 4 Self-Employed Life Insurance
- 5 Tips for Self-Employment Benefits Packages
Health Insurance Options for the Self-Employed
Health insurance is a critical benefit that you and your family cannot afford to go without, and there are plenty of companies that specialize in coverage for self-employed individuals and their employees. If you recently left another employer, you may be able to continue COBRA coverage for up to 36 months.
These are our top picks for self-employed health insurance benefits:
HeathCare.gov is a government-sponsored website called the Marketplace that is perfect for short-term coverage. Also known as Obamacare, the Affordable Care Act allows individuals and some small businesses to purchase health insurance coverage through the online Marketplace. Each year, open enrollment is limited to November through mid-December for the following year, but some plans do allow for special enrollment.
Blue Cross Blue Shield
Blue Cross Blue Shield uses regional networks of providers to offer consistent and reliable health insurance coverage. There are many different options for health insurance, and while not all plans may be available in your region, you do have access to an enormous national network of providers.
As the country’s largest health insurance company, UnitedHealthcare members enjoy widespread coverage with ACA-compliant plans offered at largely affordable rates. Coverage is not an issue like it is with other companies, so you can feel secure that you are covered no matter where you live.
You may have had a Cigna insurance policy at your last job because it is popular for both group and individual health insurance plans. It does not offer short-term health insurance, and coverage is limited to 12 states, but if you find a policy that meets your needs, Cigna can be both flexible and affordable.
Like Cigna, Humana does not offer short-term insurance. Still, it provides some of the cheapest self-employed health insurance available, with dental and vision insurance as options for add-on coverage. The coverage area only spans 22 states, so you will need to check availability before purchasing a plan.
University Alumni Associations
If you’re a college graduate, you could be eligible to participate in a group health insurance plan through your university alumni association membership. These associations can offer everything from health insurance to travel insurance, with coverage available for your entire family if you live within the eligible service area.
The Freelancers Union specializes in custom coverage for health, dental, and life insurance for the self-employed. Through its group health coverage for members, you’ll enjoy access to comprehensive healthcare at a subsidized rate. Plus, you can benefit from all of the support and resources that the Union has to share with you.
Disability Insurance for the Self-Employed
When you are self-employed, you do not have the luxury of paid leave benefits. This is where disability insurance is crucial to ensure that if a disability keeps you from work, your bills will still be paid. This could be due to sickness or an accident, but either way, it is essential coverage for the self-employed to have.
Both short- and long-term disability insurance coverage is available. Short-term coverage is limited to two to five years, while long-term disability insurance is designed to cover an extended period through extended coverage. Short-term coverage is excellent if you are having surgery or giving birth; long-term coverage is designed to help if a disability removes you from work for years.
To best determine your needs, meet with a reputable insurance agent who can assess your needs and recommend custom self-employed disability insurance coverage that is right for you.
Self-Employed Retirement Plans
Retirement plans from an external employer can take up a huge portion of your salary, but a self-employed retirement plan is very different from the programs you receive from an employer. As an individual, you have a wider network of coverage available to you, and there is greater flexibility because there are fewer restrictions imposed on the self-employed.
Traditional or Roth IRAs are a popular option for beginning investors, with individual plans allowing up to $6,000 in 2019 contributions. A 401(k) plan is great for business owners without employees, accepting up to $56,000 in 2019 contributions (or 100% of earned income, if that is lower). If your spouse works for you, that income may also be included in your plan contributions. Additionally, a SEP IRA is a self-employed IRA designed to include a few employees; a simple IRA will accommodate up to 100 employees.
Carefully shop and research the best 401(k) retirement plans for the self-employed to see which plans offer the best terms for you.
Self-Employed Life Insurance
With all of the expenses that a business owner faces, it’s tempting to skip out on life insurance when you are self-employed. This can be a huge mistake because if anything were to ever happen to you, you would no longer be able to generate the income that your family depends on. Life insurance for the self-employed ensures that even in an emergency, your expenses will still be paid.
If, at some time, you also decide to take out a loan for your small business, the lender could require that you provide proof of coverage for a life insurance policy before your loan will be approved. This way, the bank knows that their loan is guaranteed and will be repaid even if something were to happen that could affect your earning potential.
Given the importance of life insurance, it can be easy to feel overwhelmed, and pushy agents may try to oversell you on coverage you don’t need. Work with a legitimate life insurance agent, so you are not vulnerable or susceptible to overcharges and inadequate coverage.
Tips for Self-Employment Benefits Packages
When you are self-employed, there’s no worry about a company’s set employee benefits package, or whether you have to negotiate health insurance into an already low salary. It can be challenging to try to compare different employee benefits packages and weigh that against the job you really want. When you are self-employed, you no longer have to choose between your salary or benefits, because you can have both.
With all the choices available, it is also important to carefully research and explore your options before committing to a policy. A health savings account (HSA) could be a popular choice, but just like your individual health insurance plan or a term life insurance policy, it’s always best to thoroughly research and vet your options before making a decision.
Networking can also provide an invaluable opportunity for tips and advice. Participate in a business networking event to meet other self-employed professionals and learn more about the kinds of benefits and plans that work for them. It could save you a ton of time and research, and you can learn about someone’s actual experience with the company.
Self-employed Americans have finally been able to balance the scales when it comes to money versus job satisfaction, and you can still enjoy excellent employee benefits, even if you work for yourself. Insurance companies are increasingly adapting their policies to meet the unique needs of the self-employed, and it is reinventing the modern workplace. You can have it all, with a little research and a lot of planning.
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This post was updated January 15, 2020. It was originally published January 15, 2020.