Short-term disability insurance offers self-employed workers partial income replacement for a limited period after illness or injury. Compare benefit percentage (commonly 40-70%), elimination periods (often 0-14 days), benefit duration (commonly 3-6 months), and policy riders. Check interactions with state temporary disability programs and SSDI, and consult a tax advisor about premium tax treatment.

Why self-employed people should consider short-term disability insurance

If you're self-employed, a period out of work from illness or injury can quickly drain savings and disrupt bills. Short-term disability (STD) insurance replaces a portion of your income for a limited time after a waiting (elimination) period, helping cover mortgage, rent and essential expenses while you recover.

What STD typically covers

Most individual STD policies pay a percentage of your pre-disability income - commonly 40-70% - for a limited benefit period. Typical elimination periods range from 0-14 days; common benefit periods run 3-6 months, and some policies extend up to 12 months. Policies usually cover non-work illnesses and injuries; extreme sports or specified hazardous activities are often excluded.

Key policy features to compare

  • Benefit amount: how much of your income the policy will replace. Calculate a realistic monthly need based on fixed expenses.
  • Elimination (waiting) period: shorter waits cost more. Match this to emergency savings.
  • Benefit period: how long benefits last (weeks or months).
  • Definitions of disability: "own-occupation" vs "any-occupation" matters for some professions.
  • Riders: partial/residual disability, cost-of-living adjustments, or return-to-work incentives.
  • Exclusions and pre-existing condition clauses.

Underwriting and cost factors

Insurers usually require an application and health questions; higher benefits may trigger medical exams or records checks. Premiums depend on your age, occupation, health history, benefit level, elimination period and benefit period.

How STD interacts with other income sources

Check whether state temporary disability programs (for example, California, New York, New Jersey, Rhode Island) apply to you - some states allow self-employed people to opt in. STD can coordinate with Social Security Disability Insurance (SSDI) or any employer coverage you may have. Understand how private benefits integrate with public benefits and unemployment rules.

Taxes and recordkeeping

If you pay premiums personally, benefits are generally received tax-free; if an employer pays premiums, benefits may be taxable. Tax rules for self-employed people and deductibility of premiums can be complex - confirm with a tax professional.

How to buy and what to check

Start by listing monthly essentials to set a minimum benefit target. Shop multiple insurers, compare quotes and riders, and read exclusions closely. Ask about claims turnaround times and the insurer's reputation for paying claims. Consider working with an independent broker who specializes in disability insurance for small-business owners.

Short-term disability insurance doesn't replace long-term planning, but it can provide critical breathing room if you can't work for weeks or months. For many self-employed people, a modest premium buys meaningful financial protection and peace of mind.

  1. Confirm current IRS guidance and state rules on deductibility and tax treatment of disability insurance premiums and benefits for self-employed individuals
  2. Verify typical benefit percentages, elimination periods and common benefit durations across major insurers in 2025

FAQs about Short Term Disability Insurance

How much of my income will short‑term disability pay?
Most policies replace 40-70% of your pre-disability earnings. Choose an amount that covers essential monthly expenses rather than your entire income.
How long will benefits last?
Common benefit periods are 3-6 months; some policies extend up to 12 months. Longer benefit periods usually increase the premium.
Will I need a medical exam to apply?
Insurers typically require a detailed application and health history. Higher benefit levels or certain ages may trigger medical exams or records checks.
Can I get coverage if I do hazardous hobbies?
Many policies exclude injuries from extreme sports or list them as rated/declined. Disclose activities on the application to avoid claim denials.
Are STD benefits taxable for self‑employed people?
Tax treatment depends on who pays the premium and your tax situation. Benefits paid on policies you pay with after-tax dollars are generally tax-free, but rules for self-employed taxpayers and deduction eligibility are complex - consult a tax professional.