Disability Insurance for the Self-Employed (Updated 2025)

Self-employed workers lack employer benefits and often need disability insurance to protect income during illness or injury. Compare short-term and long-term policies, understand own-occupation versus any-occupation definitions, evaluate elimination and benefit periods, and document income for underwriting. Consider association plans and any state temporary disability programs. Consult a tax advisor about premium deductions and benefit taxation.

Why self-employed people need disability insurance

If you run your own business or work from home as a contractor, you don't get employer-paid benefits. That makes disability insurance one of the handful of personal protections that replace lost income if illness or injury stops you from working.

How disability insurance helps

Disability coverage replaces a portion of your earnings when you can't work because of a medical condition. That replacement income helps pay household bills, cover business overhead, and give you time to recover instead of returning to work prematurely.

Short-term vs. long-term: what to expect

Short-term disability typically covers several weeks to months. Long-term disability starts after a waiting period and can continue for years or until retirement age, depending on the policy. Policies vary widely, so compare elimination periods (waiting time), benefit periods, and monthly benefit amounts.

Key policy features to compare

• Own-occupation vs. any-occupation: Own-occupation policies pay if you cannot perform your regular job. Any-occupation policies pay only if you cannot do any job for which you are reasonably qualified.

• Benefit amount: Many policies replace a percentage of income (often around half to two-thirds), subject to a maximum.

• Elimination period: The waiting time before benefits begin. Shorter periods cost more.

• Riders: Consider residual/partial disability (for reduced earning capacity), COLA (cost-of-living adjustments), and future increase options.

• Gather income documentation: tax returns, Schedule C, and 1099s help underwriters verify your income and set benefits.

• Shop across carriers and channels: major insurers, broker marketplaces, and professional associations can all offer policies. Some trade groups and associations provide group or discounted coverage for members.

• Consider state programs: several states operate temporary disability or paid family leave programs. Check whether your state offers a program that applies to you.

• Underwriting and medical exams: insurers evaluate your occupation, medical history, and income. Expect some applications to require exams or medical records.

Tax treatment depends on who pays the premiums and how you deduct them. The simplest rule: ask a tax advisor before using policy payments or premium deductions as part of your financial plan.

Practical steps to start

Get quotes from multiple insurers, compare own- vs any-occupation language, and choose an elimination period and benefit amount that align with your emergency savings and business overhead. Even a modest policy can keep your household and business afloat while you recover.