Do You Need Disability Insurance?

Protecting Your Income

As a solopreneur, you have made some sacrifices—the corner office, corporate charge cards, paid vacations—but the one worry you probably can’t seem to shake is healthcare.

Medical, dental, vision—your old work insurance wasn’t perfect, but at least it covered some of everything. The good news is that there are many options for health care insurance these days for the self-employed, freelancer, and entrepreneur.

But even so, healthcare insurance doesn’t cover everything – What about disability?

Disability insurance, or DI, protects a portion of your earned income in the event that physical or mental injury disrupts your ability to work. DI often includes long-term and short-term disability benefits, as well as paid sick-leave and maternity leave.

When it comes to health insurance, the calculus is fairly straightforward: either you or a member of your family is certain to need medical care of one kind or another in the future, so some form of healthcare coverage is a basic necessity. But disability insurance is different, right? It’s not necessary…is it?

That all depends.

Generally speaking, disability insurance is as important as life insurance, especially for workers under 50. According to the U.S. Council for Disability Awareness, every year about 12% of the American workforce suffers an injury that will cause long-term disability. The average disabled worker is out of the employment pool for 30 months. Can you survive without income for two and a half years? Exactly. Most Americans only have enough savings in the bank to pay their bills for a period of 3-6 months.

DI policies can seem expensive and complicated, but they need not be. If you believe that disability insurance is too important to ignore, here are some things to know to help you get the coverage you need at the best possible price.

How Much Is Enough, How Much Is Too Much

The point of long-term disability insurance is to protect your income. If you’re injured and disabled, then DI will help you pay your bills so you can focus on your recuperation. The problem: DI policies for self-employed and freelance workers rarely replace gross revenue. Even a fairly generous policy will only cover the portion of your business earnings that are specifically designated “income.”

To get a picture of your “income” (as it will appear to an insurance broker), look at the portion of your earnings for which you pay income taxes.

The cost of DI all depends on how much income you earn. If your current income is $50,000, then you can expect to pay around $250 every month, or $3,000 per year. That $3,000 represents 6% of your salary. If your job is especially dangerous, then the cost of your policy will increase. That’s the long and short of it.

One last thing to keep in mind: an injury that disrupts your ability to work won’t necessarily happen at work. Millions of freelancers spend the better part of each day hunched over a laptop, but an injury that occurs off the clock can still impair your ability to earn an income. As always: if you can afford an insurance, it’s better to be safe than sorry.

Steve Strauss

Steve Strauss is the senior small business columnist at USA TODAY, the Editor-in-Chief here at Small Business Connection, a speaker and spokesperson. He can be reached at

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