Compare short-term and long-term disability insurance. Learn coverage periods, benefit amounts, waiting periods, and how to protect your income.
Insurance for Self-Employed & Freelancers
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Insurance Guide for Self-Employed & Freelancers
When you’re self-employed, you’re responsible for coverage that employees typically receive through work. The good news: you often have more options and can deduct premiums from your taxes. This guide covers what you need and how to get it affordably.
At a Glance
- Health insurance is your top priority—explore marketplace plans, spouse’s employer plans, or health sharing options
- Self-employed health insurance deduction lets you deduct 100% of premiums from income taxes
- Disability insurance protects your income if you can’t work—critical when you are the business
- Liability insurance shields your business from lawsuits and claims
- Life insurance matters if you have dependents relying on your income
- Retirement accounts provide tax advantages now and security later
Health Insurance
Without employer coverage, health insurance becomes your responsibility. Here are your options.
ACA Marketplace Plans
Shop at Healthcare.gov (opens in new tab) (or your state marketplace) during open enrollment (November-January).
What to know:
- Premium tax credits: Many self-employed people qualify based on projected income
- Metal tiers: Bronze (low premium, high deductible) through Platinum (high premium, low deductible)
- Network matters: Check that your preferred doctors are in-network
- Deductible and out-of-pocket max: Know your potential exposure
Spouse or Partner’s Employer Plan
If your spouse has employer coverage, joining their plan is often the most cost-effective option. Compare the added premium cost against marketplace alternatives.
Health Care Sharing Ministries
Not insurance, but an alternative for some:
- Members share medical costs
- Lower monthly costs than traditional insurance
- Fewer regulatory protections
- May exclude pre-existing conditions
Short-Term Health Plans
Temporary coverage for gaps:
- Limited benefits and exclusions
- Pre-existing conditions not covered
- Maximum duration varies by state
Self-Employed Health Insurance Deduction
This is a significant tax benefit:
- Deduct 100% of health insurance premiums (for yourself, spouse, and dependents)
- “Above the line” deduction—reduces adjusted gross income
- Available whether you itemize or take standard deduction
- Cannot deduct in months you were eligible for employer coverage
Disability Insurance
Your ability to work is your most valuable asset. Disability insurance replaces income if illness or injury prevents you from working.
Why It’s Critical for Self-Employed
- No employer-provided coverage
- No paid sick leave
- No workers’ compensation if you’re injured
- Business income depends entirely on your ability to work
Key Terms to Understand
| Term | What It Means |
|---|---|
| Own-occupation | Pays if you can’t do your specific job (preferred) |
| Any-occupation | Only pays if you can’t work any job (cheaper, less useful) |
| Elimination period | Waiting period before benefits begin (30-180 days) |
| Benefit period | How long benefits last (2 years, 5 years, to age 65) |
| Non-cancelable | Insurer can’t change terms or rates |
| Guaranteed renewable | Can renew, but rates may change by class |
What to Look For
- 60-70% of income replacement: Standard benefit amount
- Own-occupation definition: Critical for specialized work
- Benefit period to age 65: Long-term protection
- Elimination period of 60-90 days: Match to your emergency fund
- Business overhead expense rider: Covers business costs while disabled
How to Buy
Get quotes from multiple insurers—rates vary significantly:
- Work with an independent insurance broker
- Complete health questionnaires and possibly a medical exam
- Rates based on age, health, occupation, and income
Liability Insurance
Protects your business and personal assets from lawsuits and claims.
Professional Liability (Errors & Omissions)
Covers claims arising from your professional services:
- Missed deadlines
- Work errors or omissions
- Client disputes
- Negligence claims
Who needs it: Consultants, designers, developers, writers, accountants, photographers, and most service providers.
Typical coverage: $1 million per occurrence, $2 million aggregate.
General Liability
Covers bodily injury, property damage, and personal injury related to business operations:
- Client injured at your location
- You damage client property
- Advertising injury (defamation claims)
Who needs it: Anyone with client contact, physical products, or business premises.
Business Owner’s Policy (BOP)
Bundles general liability with business property coverage:
- Often more affordable than separate policies
- Includes coverage for equipment and inventory
- Good for home-based businesses with some equipment
Life Insurance
If others depend on your income—spouse, children, aging parents—life insurance provides financial security.
Term Life Insurance
Almost always the right choice for self-employed people:
- 10-30 year terms align with major obligations
- Coverage amount: 10-12x annual income, plus debts
- Affordable: A healthy 35-year-old might pay $30-40/month for $500,000
When to Skip It
If no one depends on your income financially, life insurance may not be necessary. Revisit when circumstances change.
Business-Related Life Insurance
Key person insurance: Protects business if a critical person dies Buy-sell funding: Provides funds for business succession Debt coverage: Pays off business loans
Business Property & Equipment
What to Cover
- Computer equipment and electronics
- Software and data
- Home office furniture
- Professional tools and inventory
- Client materials in your possession
Coverage Options
Business property rider on homeowners/renters: Limited coverage, may not cover business use.
Inland marine insurance: Covers equipment used at multiple locations—good for photographers, consultants who travel.
Business owner’s policy (BOP): Includes property coverage with liability.
Cyber liability: Covers data breaches and ransomware—increasingly important.
Auto Insurance for Business Use
If you use your personal vehicle for work, your personal auto policy may not cover business use.
When Business Use Matters
- Client meetings at their location
- Transporting equipment or supplies
- Deliveries
- Multiple client sites per day
Coverage Options
Hired and non-owned auto coverage: Part of commercial policy, covers vehicles you rent or employee vehicles used for business.
Commercial auto policy: If you have a dedicated work vehicle.
Personal auto with business endorsement: Some insurers offer this for occasional business use.
What to Check
Read your personal auto policy for business use exclusions. A claim denied for undisclosed business use could be catastrophic.
Retirement Accounts
Retirement accounts provide tax advantages now and financial security later.
Options for Self-Employed
| Account Type | 2024 Contribution Limit | Best For |
|---|---|---|
| SEP-IRA | Up to 25% of net earnings (max $69,000) | Simple setup, high limits, contribution flexibility |
| Solo 401(k) | $23,000 employee + 25% employer (max $69,000) | Maximum contributions, loan options |
| SIMPLE IRA | $16,000 + 3% match ($19,500 if 50+) | If you have employees |
| Traditional IRA | $7,000 ($8,000 if 50+) | Lower income, tax deduction now |
| Roth IRA | $7,000 ($8,000 if 50+) | Tax-free growth, income limits apply |
What to Consider
- SEP-IRA: Easiest to set up, no annual filings, flexible contributions
- Solo 401(k): Higher contribution limits, but more paperwork
- Combine accounts: Can have SEP-IRA and Roth IRA simultaneously
Self-Employed Insurance Checklist
- Health insurance: Compare marketplace plans during open enrollment
- Emergency fund: 3-6 months of business and personal expenses
- Disability insurance: Get quotes for own-occupation coverage
- Professional liability: Essential for most service businesses
- General liability: If you have client contact or physical presence
- Life insurance: Term policy if you have dependents
- Business property: Review coverage for equipment
- Auto insurance: Confirm business use is covered
- Retirement account: Open SEP-IRA or Solo 401(k)
- Tax deductions: Track all insurance premiums for deduction
Not Sure What You Need?
Take our free 2-minute quiz to get personalized insurance recommendations for your self-employed situation.
Next Steps
- Compare health insurance options—marketplace plans, spouse’s plan, or alternatives
- Get disability insurance quotes—protect your most valuable asset
- Review liability coverage—assess your business risks
- Open a retirement account—get tax benefits this year
- Track premiums for deduction—health, disability, and business insurance
Related Guides
- Insurance for Freelancers
- Health Insurance Guide
- Life Insurance Guide
- Disability Insurance
- Business Insurance
Similar Situations
- Insurance for Gig Workers - Platform and delivery workers
- Insurance for Small Business Owners - If you have employees or a larger operation
Related Checklists
- Going Freelance Checklist - Essential coverage when leaving traditional employment
- Starting a Business Checklist - Insurance requirements for new business owners
Related Calculators
- Life Insurance Needs Calculator - Essential for self-employed income replacement planning
Frequently Asked Questions
Can self-employed people deduct health insurance premiums?
Yes, self-employed individuals can deduct 100% of health insurance premiums for themselves, spouse, and dependents as an above-the-line tax deduction. This applies to medical, dental, and long-term care premiums.
What business insurance do self-employed people need?
Most self-employed people need general liability insurance and professional liability (E&O) if providing services. Home-based businesses may need a business rider on homeowners insurance. Some professions require specific coverage.
How do I get health insurance as a self-employed person?
Options include ACA marketplace plans (may qualify for subsidies), spouse’s employer plan, professional association group plans, health sharing ministries, or private insurance. Compare costs and coverage carefully.
Do self-employed people need disability insurance?
Yes, disability insurance is crucial for self-employed individuals who don’t have employer sick leave or disability benefits. A disability policy replaces income if you can’t work due to illness or injury.
What's a SEP IRA and how does it relate to insurance?
A SEP IRA is a retirement account for self-employed individuals allowing higher contribution limits than traditional IRAs. While not insurance, it’s part of financial protection—building retirement savings reduces reliance on other financial safety nets.
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State Insurance Guides
Insurance requirements, costs, and available programs vary significantly by state. Find state-specific resources to complement your insurance for self-employed & freelancers coverage research.
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