5 Components to a Self-Employed Benefits Package

When you’re self-employed, you get perks that many traditional employees miss: Unlimited vacation and sick days, flex time, tax deductions, and perhaps the ability to work from any location. These are just a few upsides of being your own boss.

Whether you have a part-time side gig or run a small business full-time, enjoying the entrepreneur lifestyle may be a huge reason you want to work for yourself. But a major downside to all this freedom is not getting a cushy benefits package, which most employers offer.

In this post, you’ll learn how to create your own self-employed benefits program, which is probably easier than you think.

1. Individual Health Insurance

If you’ve made the leap from a corporate job to being self-employed, the first benefit you’re likely to miss is health insurance. Group plans cost much less than an individual policy; plus, your employer may have subsidized all or some of your premium.

If you have a spouse or domestic partner with group health benefits, you can become a dependent on his or her policy. But if you’re single or have a partner who’s also self-employed, start shopping.

Depending on your income and family size, you may be eligible for a subsidy that reduces the cost of coverage. If you have low income, you may qualify for free or low-cost coverage from Medicaid or the Children’s Health Insurance Program (CHIP).

One option to reduce the cost of health insurance is to choose a high-deductible plan. These allow you to make contributions to a health saving account (HSA), which you can spend tax-free on many different qualified medical expenses.

2. Health Savings Account (HSA)

With many types of insurance policies, a strategy to cut premiums and save money is to raise your deductible. A deductible is the amount you must pay first before your benefits kick in.

If you’re in relatively good health, a high-deductible plan can make sense. But the downside is that if you do get sick, you’ll have to pay more out-of-pocket before your payouts for covered claims begin.

When you choose a high-deductible health plan, not only do you pay lower premiums, but you’re also allowed to contribute to a health savings account (HSA). You can have an HSA if you get your qualified plan on the open market as an individual, or through a group plan at work.

Contributions to an HSA are deductible on your tax return, which reduces your tax liability, even if you don’t itemize deductions. Your funds can earn interest or be invested for potential growth. And when you take distributions to pay for qualified medical expenses—such as doctor co-pays, prescriptions, eyeglasses, and supplies—your contributions and earnings are completely tax-free.

3. Term Life Insurance Policy

The good news is that if you’re in relatively good health, finding affordable life insurance is probably easier and less expensive than you think.

First, consider if you need a life policy. If anyone depends on you or would be hurt financially if you weren’t around, such as children, a spouse, partner, or aging parents, you need life insurance. There are different types, such as term life and permanent life, depending on your financial goals.

  • Term life insurance provides a benefit upon the death of the policy owner for a set period, such as 10 or 20 years. Many people prefer term insurance because it’s inexpensive and gives you the most benefit for the dollar.
  • Permanent life insurance includes a variety of products such as whole life, universal life, and variable life. I won’t get into the details on each of those, but they provide a death benefit and an investment all wrapped up in one. They’re also called permanent life policies because you get lifetime coverage.

Life insurance coverage is more affordable than most people think. For example, if you’re in your 30s with relatively good health, your premium for a 20-year, $500,000 term policy would be about $200 per year. You can shop and compare term life quotes at sites like Haven Life, Liberty Mutual, and USAA.

4. Disability Insurance

Did you know that you’re more likely to suffer a disability than you are to die before the age of 65? And when a long-term disability occurs, the average absence from work is 2½ years. Remember that health insurance only pays a portion of your medical bills; it doesn’t pay your living expenses, like housing or food, if you can’t earn money for an extended period. A disability policy pays a percentage of your gross income, such as 60% or 70%, if you can’t work due to a disability, illness, or accident.

Not being well enough to work could cause a major financial strain for you or family members who depend on your income. Social Security is only available after you’ve been out of work for a year and are completely disabled.

If you’re self-employed, you can elect to pay state disability premiums, which may be less expensive than a private policy. Shop both options to find coverage that makes sense for your work and financial situation. Check out companies including MetLife and State Farm.

5. Contribute to a Tax-advantaged Retirement Account

Another essential benefit you’ll need to handle on your own after becoming self-employed is contributing to a retirement account. There are great options to invest for the future, even when you don’t have a traditional day job with a 401k.

There are great options to invest for the future, even when you don’t have a traditional day job with a 401k. Here are four different types of tax-advantaged retirement accounts to consider when you work for yourself.

1. Traditional IRA (Individual Retirement Arrangement).

2. Roth IRA


4. Solo 401K

Thinking About Starting Your Own Business?

Being your own boss is an exciting jump to make, but when entering into that adventure, you’ll find that there is much preparation to be done. One of the biggest obstacles new business owners find themselves up against is funding. Where will you get the money to purchase your equipment? How will you purchase or rent a space? How will you hire your marketing specialist? Or pay for advertisements? Fortunately, many new business owners qualify for Business Loans or No-Doc Loans. If you’re ready to dive into your new business, give us a call to see what size loans you qualify for. There’s nothing more exciting to us, than helping out new business owners to achieve their vision!

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