Independent Contractor

Answer:

As a self-employed person, you need health and disability insurance as much as anyone. Most people get these types of insurance through their employers, but unfortunately this is not an option for you. You're your own boss, but that also means you have to supply your own benefits.

Health insurance
In terms of health insurance, your options may be limited to:

• Individual health insurance coverage purchased directly from a provider, or
• Group coverage purchased through a professional association or civic group (e.g., trade group, Chamber of Commerce, etc.)

Individual health insurance covers medical expenses on an individual basis. When you apply for individual insurance, your "risk potential" may be evaluated through a series of medical questions and/or a physical exam in order to determine whether you qualify for health insurance and how much it will cost. Individual insurance is typically more expensive than group coverage, but it may also provide more freedom to customize the policy to suit your personal needs.

Most people get group health insurance through their employers, but you'll have to look a little harder to find group coverage. Trade and professional organizations sometimes offer group insurance coverage, as do some civic groups and churches. With group coverage, the premium from group insurance is calculated based on characteristics of the group as a whole. All eligible members of the group can purchase insurance coverage under the plan, regardless of age or physical condition.

Disability insurance
Disability insurance for self-employed people is typically available through the same sources:

• Individual disability insurance coverage purchased directly from a provider, or
• Group coverage purchased through a professional association or civic group (e.g., trade group, Chamber of Commerce, etc.)

You will probably have to meet certain standards relating to age, income, occupation, health, and lifestyle before you are issued an individual disability policy. You will pay more for individual coverage than for a group policy, but you often get more for your money. Individual disability insurance provides a policy tailored to meet your needs, and may have more liberal benefits than group coverage. For example, an individual policy may have a longer benefit period or may replace a greater percentage of your income than a group policy.

Trade or professional associations sometimes offer disability coverage to their members. Although it is group-sponsored, association policies are actually issued to individual group members who must prove insurability. Insurability standards for association members are sometimes relaxed, however, and you will find it easier to qualify for association disability insurance than for an individual policy. Premiums for an association-sponsored policy are initially less than for an individual policy, but after a certain term (five or ten years) the premium can rise and may eventually exceed the premium for an individual policy.

In addition, government-sponsored programs such as workers' compensation and Social Security provide some disability protection. Unlike other types of disability coverage, you don't have to pay a premium for these programs. However, you do finance some types of government disability insurance by paying taxes. Disability coverage under these programs is extremely basic, and should not be relied upon as your sole source of disability protection.