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There are different types of disability income coverage available for people who are self-employed.

The different types of individual disability income replacement coverage generally require medical underwriting. Medical underwiriting is when an insurer takes the applicant's past and current health condition into account.)

If you are considering obtaining this kind of coverage, below is an overview of alternatives. It is recommended that you work with a knowledgeable insurance agent or broker who can advise and guide you in this process. To maximize his or her help, be open about your health condition. (To learn how to choose and maximize use of an insurance broker, click here.)

If You Have No Employees

Your only choice for income replacement is to obtain one of the disability income policies on an individual basis, which almost always requires medical underwriting.

If you cannot get individual coverage due to your medical condition, look for a group policy from a business association or professional association to which you belong or could join. In fact, professionals such as doctors, lawyers and dentists usually have access through their professional associations to plans that are much broader than plans sold to the general public.

If you can qualify for individual coverage, purchase it before you purchase group coverage. The people who issue individual plans will consider the amount of disability income coverage you already have, including group plans, before determining how much individual coverage to permit you to purchase. On the other hand, Group Long Term Disability policies do not consider what individual coverage you have. By buying the individual first, you can end up with a benefit between the individual and the group that equals or even exceeds your income.

If You Have One Or More Employees

If you have one or more employees, in addition to being able to purchase one of the disability income policies described above, your group may qualify for a group policy. Some companies will write groups of only five employees, sometimes even less, without any medical questions. (To learn about Group Disability Income Insurance policies, click here.)

To determine what is available in your state, call an insurance broker (For information on choosing a broker, see Choosing An Insurance Broker).

If you cannot obtain disability income coverage for your group, you may be able to obtain the coverage:

  • For yourself, by joining a group or association for which you qualify as a member.
  • For all your employees, by transferring employment of all employees, including yourself, to a leasing company that has disability income benefits. These companies "lease" employees to other businesses. For example, a doctor can make an arrangement with a leasing company for the leasing company to employ every one on the doctor's staff - even though they continue to work in the doctor's office, under the doctor's control. The doctor pays a monthly check to the leasing company that covers salaries, taxes and benefits, as well as a fee for the leasing company.

NOTE: While considering disability income protection, consider all the other actions that a self employed person should also consider. For example, planning for how your workload will be handled if you are not feeling well.  For information, click here.