3 Health Insurance Options For The Self-Employed
The number of people working as freelancers is rising steadily. In 2016, roughly 53 million Americans engaged in some kind of freelance work, making up an astounding 35 percent of the country’s labor force.
The Rise of the Freelance Economy
The rapid rise in freelancing is largely due to the growth of freelance platforms such as Uber, Lyft, Upwork, Freelancer, and AirBnB. Breakthroughs in financial technology have also encouraged people to become their own bosses and sell their services to various clients. Mobile and e-commerce payments are now swifter, more reliable, and practically seamless, which has made it easier for freelancers to complete transactions in a safe and convenient manner.
Freelance work has many attractive benefits, such as having control over one’s own work schedule, being able to work from anywhere, and not being tied to a single job. There is, however, one aspect of the lifestyle that continues to be a challenge for freelancers: health insurance.
Without a single, stable employer, freelancers miss out on the group benefits that are a perk in many traditional workplaces (see An Overview of Commercial Group Life and Health Plans to learn more about these). Because freelancers work for themselves, they are responsible for obtaining their own health insurance policies.
Although they can’t take advantage of an employer’s group health plan, they’re not entirely out of luck. Here are three health insurance options available to freelancers.
The Freelancer’s Union
The Freelancer’s Union is a union headquartered in New York City that represents more than 350,000 freelancers and offers a variety of health insurance options to its members. By joining the Freelancer’s Union, independent freelancers can purchase health insurance plans that would be otherwise unavailable to them as individual purchasers.
The Freelancers Union is still in its early years, so its scope is limited and it does not yet provide coverage for freelancers in every part of the country. However, since there is a pressing need for supplying health insurance to the growing population of freelancers, the organization could soon grow and extend its offerings nation-wide.
The National Association for the Self-Employed
Like the Freelancer’s Union, the National Association for the Self-Employed (NASE) is an association that provides a number of benefits to its members. Members can, for instance, enjoy discounts from Quickbooks, Office Depot, LegalZoom, and Turbotax, but the chief benefit is the health insurance options that are made available to them.
To access the benefits provided by NASE, freelancers have to pay an annual membership fee of $125 (or $25 for students). While this is not a trifling sum for many self-employed workers, the benefits associated with joining the organization may well make it a good investment.
If you’re thinking of joining the NASE, you can even get a health insurance quote before you make your decision and pay membership dues. Getting a quote in advance can help you decide whether joining the organization will be worth your while.
Private Individual Health Insurance
And, of course, freelancers can also purchase private individual health insurance.
Purchasing an individual policy gives you a lot of flexibility, since it allows you to shop around for the ideal coverage option rather than being restricted to those offered through a particular union or association. However, you won’t be able to take advantage of the lower premiums that are typically available through group health insurance policies.
Be sure to look into the options listed above before deciding to purchase an individual policy. You might discover that one of these organizations offers all the coverage you need at a lower price (if you are considering an individual policy, see these 10 Tips for Choosing the Right Health Insurance Policy).
Get the Best Insurance While Self-Employed
1. Don’t Go It Alone
Yes, you can get insurance coverage online, but there is a better way! Find an independent insurance agent who you feel listens to your concerns, asks questions, and seeks to understand what you are doing and what worries keep you up at night. An independent agent works directly with multiple carriers to shop coverage on your behalf instead of having to call around and repeat the same information over and over.
Find an agent who specializes in business insurance, but one that also has personal insurance options too. You may be able to start your business with an add-on to your home insurance, but as your business grows, your agent will be able to help you understand if a change to your current policy needs to be made. Asking around to other business owners you trust, or others in your industry is a common way to begin the process of selecting an agent.
Read: Working From Home? You Might Need Insurance for That
2. Home-Based Businesses Beware!
Many self-employed people do not have an outside physical location and operate from their home. You probably have homeowners’ insurance, but did you know that does not protect your business?
Some home insurance companies have created in-home business endorsements to add on to an existing home insurance policy. This is an inexpensive option and is great for a sole proprietor business with no employees, a small amount of physical property, and no customers who are coming in to the home. Coverage varies significantly by insurance company.
However, if you have established a separate business entity (LLC, Corporation, etc.), this endorsement typically won’t be available as home insurance coverage is designed to protect you personally, but not your business.
If that is the case, you will want to get a Business Insurance policy often referred to as a Business Owners Policy (or BOP), it has three main features:
- Provides protection for your Building and/or Business Property (Property),
- Provides protection for injury or damage to others (General Liability), and
- Provides protection for lost income in the event of a covered loss (Business Income).
Read: The Basics of Business Insurance
The value of property and degree of risk in your industry can affect the type and pricing of coverage needed. But, if you understand the risks associated with your business in those three aspects, you are ahead of the game and ready for the next step.
3. Be Ready for the Conversation With Your Agent
It takes a little work on your part to gather up the information to have a productive conversation with your agent, but if you can get the information below, it is a great start:
- Employee Identification Number
- Estimated annual sales
- Estimated annual payroll and number of employees
- Estimated annual subcontractor costs
- Estimated value of Business Personal Property (your “stuff”)
- Estimated value of property you take off the premises (in-vehicle, to client meetings, etc.)
- For any physical location:
- Copy of the lease (if applicable)
- Square footage you rent and total building square footage
- Update years of Roof, HVAC system, Electric & Plumbing
- Number of stories
- Building construction
- Protection (fire & burglary alarm, sprinklers, etc.)
- Copy of sub-contractor agreement
- List of any additional insureds and specific wording required in the contracts
Read: 25 Key Business Insurance Terms You Should Know and Understand
4. Price Isn’t Everything
Both you and your agent want an affordable insurance product, but protecting the livelihood of your business is where the focus should be. When your agent offers you additional coverages, ask them to explain what you don’t understand, and ask what risks they could potentially see or have seen in your industry. You don’t have to proceed with every option, but take the time to have that conversation so that you can make an informed decision.
Many insurance carriers have a minimum premium (most are around $500 annually). If this is the case for your policy, sometimes additional coverages can be added in and still come in at that minimum premium mark. If the premium exceeds the minimum, sometimes the agent has credit they can apply to reduce the premium slightly if certain criteria is met.
Ask if that is an option or if any additional credits are available. Some companies give additional discounts for having life insurance, for example, Progressive will let you bundle multiple insurances into one, so that may be of interest to you to at least have that conversation.
5. Review Your Coverage With Your Agent Annually
Businesses change year to year and you want to make sure your coverage remains up to date. Sometimes businesses change in record pace, as the 2020 pandemic and lockdown has shown us!
If you add new products, offerings, or services, be sure to reach out to your agent and discuss potential issues. Even better if you reach out to talk with your agent before making the change and they can help you head off any potential insurance issues before implementation!
Bonus tip! Be sure your website shows what you are actually doing. Underwriters will review your website and can decline businesses due to advertised services that haven’t been done in years or services you’re potentially considering in the future.
There are many other coverages you may need to round out comprehensive insurance protection for your business. Below are some of the most common recommendations for a self-employed business, but it is far from an all-encompassing list.
- Cyber Coverage – almost every business uses computers, internet services, credit card processing, etc. – the more you use computers and the internet, the greater the risk of a security breach.
- Commercial Auto Insurance – even if you don’t own company vehicles, there are coverages that protect your business while driving a personal vehicle for work purposes.
- Workers Compensation – don’t assume that if you don’t have employees you don’t need it, this could still be an issue. Some states require Workers Compensation for self-employed businesses and 1099 contractors can actually count as employees depending on the state and duties they perform.
- Professional Liability – if your professional opinion is part of the service you offer, you can be liable if that opinion is alleged to be inaccurate.
- Employment Practices Liability – as you add employees the risk of allegations of unfair treatment increases.
- Employee Benefits Liability – if you are offering medical benefits to your employees and make a mistake, this can protect you from a lawsuit.
- Umbrella/ Excess Liability – additional coverage limits for more protection on top of what the General Liability offers.
Read: 6 Types of Insurance All Businesses Should Have
If 2020 has shown us anything it is that the unpredictable can happen. Working with an agent you trust and having the correct coverage is the best way to ensure that you are protecting the business you’ve worked so hard to build.
Conclusion
Health insurance is an extremely important asset. A single hospital visit can easily cost thousands of dollars—not something many people can afford on a freelancer’s salary. And even those who can afford it would save themselves a lot of financial strain by having a good policy in place.
As the freelance economy continues to grow, we will likely see many more health insurance options tailored for freelancers. But, for the time being, the Freelancer’s Union and the National Association for the Self-Employed, and private individual health insurance companies offer great options that will protect your finances and allow you to keep pursuing your passion (thinking of leaving your job to pursue a freelance career? Find out What You Need to Know About Health Insurance Before Quitting Your Job).
