The landscape for American workers is rapidly changing. Increasing numbers of people are now self-employed as freelancers, independent contractors, gig workers, and full or part-time small business owners. Whether it be by choice or not, many workers are gravitating away from jobs in the traditional workplace toward occupations with greater independence.

While this newfound freedom is thrilling to many, it can be a time of uncertainty and trepidation for others. In addition to giving up the regular bi-weekly paycheck, the newly self-employed also have to worry about no longer having employer-sponsored benefits that provide financial security.

In this article, we address what is needed to structure a benefits package that will protect you physically and financially. Shopping for these benefits will be up to you, but first, let's discuss what should be on your list.

Major medical health insurance

This is a good place to start since it’s the benefit most people think of first.

Yes, it’s an expensive proposition to acquire health insurance. The same insurance companies that offer comprehensive medical plans to larger employers either offer stripped down coverage to the self-employed or no coverage at all. They let their claims experience within a given geographic area dictate what they’re going to offer and to whom.

Many self-employed individuals find the Affordable Care Act, often referred to as ACA or Obamacare, to be the most reasonably priced option available. It was designed to make coverage accessible to every individual and family in the United States at an affordable price. While some would debate whether or not it is in fact affordable, it is a viable option for the self-employed.

A high-deductible health plan is another alternative. The larger the dollar amount of the deductible, the lower the monthly premium. These plans work well for someone that rarely goes to the doctor and is not on any type of maintenance drug. They don’t mind paying out of pocket for the smaller expenses, but with some deductibles ranging as high as $10,000, the low premium comes at a high cost if a hospital stay of any length occurs.

Dental insurance

If you’re used to having health insurance through an employer, you’re very likely used to having dental insurance as well. While this may seem optional and perhaps even a luxury when you first venture out on your own, dental expenses can skyrocket into the thousands if problems arise.

Yes, self-insuring and paying out-of-pocket for bi-annual teeth cleanings is manageable. But what about crowns? Root canals? Dentures? These are very costly propositions that can put a serious dent in your emergency fund, which you should ideally have in place before becoming self-employed.

Poor dental hygiene and gum disease have been linked to heart disease and other medical conditions. Eliminating dental insurance from your benefits package is a “pay me now or pay me later” decision you need to carefully consider.

Vision insurance

At first glance, this benefit likely seems more like a nice-to-have than a must-have. But for a family that wears glasses and/or contact lenses, it’s an affordable benefit you will get your money’s worth from.

Going to the optometrist and having a complete eye exam isn’t cheap, but it’s important to your overall health. Left unchecked, uncorrected problems with the eyes can be very costly in the long-run, both in terms of health and financial costs.

Annual eye exams for the entire family, lenses and frames for someone who wears glasses, and a 12-month supply of contact lenses are expenses that will make a low monthly vision insurance premium well worth it.

Life insurance

For some, the only life insurance they’ve ever owned has been through an employer sponsored benefit plan. The amount available at work was a multiple of their annual salary and was purchased to provide funds to their beneficiaries for final expenses and cash flow needs.

Being self-employed and having to purchase life insurance on your own doesn’t lessen the need for it and the reasons you may have purchased it in the first place. Funeral expenses can easily exceed $20,000 and your lost income can devastate your family’s finances long after you’ve passed.

Buying life insurance is a very unselfish act. Leaving your family at risk financially is not something you would intentionally do. A good life insurance agent can find you a reasonably priced term life policy or universal life policy with a face amount that will provide for your family’s needs.

A retirement plan

No matter how passionate you are about your work, someday you will be ready to retire. That day may come sooner than usual if all goes as planned. After all, the daily grind of being your own boss can be just as exhausting as it is exhilarating.

There is going to come a time when you’ll want to ride off into the sunset and enjoy the well-deserved fruits of your labor. The only way this is going to happen is by setting aside money regularly to provide for you and your family in your later years. A disciplined approach is necessary, along with the proper vehicle to grow your nest egg.

There are a number of choices available to you, depending upon:

  • If you have employees or not
  • If you are a sole proprietor, limited liability corporation (LLC), partnership, S-corporation, or C-corporation

You can research the best choice for you on your own or consult with a CPA.

Depending on the type of business entity you choose to work as, you can choose from various retirement plans such as IRAs (traditional or Roth), Keogh Plans, SEPs, or 401(k)s. The amount you can salt away will vary for each, but what matters is that you start now. The longer you wait, the longer it will take your savings to compound to an amount that will allow you to enjoy a comfortable retirement.

Disability Insurance

Disability insurance could very well be the most important component of the benefits package you build for yourself as a self-employed individual.

Statistically, you are more likely to become disabled than you are to die during your working years. We all know people that had a physical or mental illness that prevented them from continuing to perform their job duties. When you’re self-employed, it’s far more difficult to leave your business behind while you recover from a disabling event. You are the business.

Disability insurance affords you the opportunity to get the medical attention you need to recover from an injury or illness without financially devastating your business and family. Your income has been critical to maintaining your standard of living; nothing is going to change if you’re laid up in the hospital or at home.

Many people think that disability insurance for the self-employed isn't available, but that's not true. If you work for yourself and can provide verifiable proof of income (typically 12 months), you very well could qualify for coverage. Like any insurance policy, it will be underwritten and then issued if you are deemed insurable. You’ll never know if you don’t try, and you can see how much it would cost by getting a quick disability insurance quote. It’s simply too important not to check.

Bottom line

A well-thought-out benefits plan is worth the investment of time you’ll make constructing it. You’ll need to analyze your budget and see where dollars can be allocated or re-directed to maximize the value of your spending. Consult with professionals that have experience working with the self-employed. Their expertise may be the difference between a life of comfort with a superior benefits package and a life of worry with one that is only adequate.


Jack Wolstenholm is the head of content at Breeze.

The information and content provided herein is for educational purposes only, and should not be considered legal, tax, investment, or financial advice, recommendation, or endorsement. Breeze does not guarantee the accuracy, completeness, reliability or usefulness of any testimonials, opinions, advice, product or service offers, or other information provided here by third parties. Individuals are encouraged to seek advice from their own tax or legal counsel.

Work-Life
Published April 08, 2020