Navigating Disability Insurance for the Self-Employed

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

How Does Disability Insurance for the Self-Employed Work?

Disability insurance for self-employed individuals provides a safety net, ensuring financial stability if they are unable to work due to illness or injury. It’s crucial as they don’t have the employer-provided coverage that W2 employees often do.

Disability Insurance For Self-Employed

Medical Underwriting in Disability Insurance

Both self-employed individuals and W2 employees undergo a similar medical underwriting process. This involves assessing the applicant’s health status, medical history, and risk factors to determine eligibility and premium rates.

Financial Underwriting: The Key Difference

The major distinction lies in financial underwriting. Self-employed people often use tax write-offs for business expenses, which can reduce their reported taxable income. Since disability benefits are typically based on this taxable income, significant write-offs can reduce the potential disability benefit.


  • Annual Income: $200,000
  • Write-offs: $150,000
  • Taxable Income: $50,000
  • Disability Benefit: Based on $50,000, not $200,000

Consideration for Business Overhead Expense Disability Coverage

For self-employed individuals, it’s not just about replacing personal income. They should consider Business Overhead Expense Disability Insurance. This coverage helps maintain business operations by covering expenses like rent, utilities, and employee payroll, independent of the owner’s personal income.

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Best Short-Term Disability Insurance For Self-Employed


Disability insurance for the self-employed is essential for financial security. While medically underwritten like regular employee coverage, the financial assessment differs. It’s important to understand how income reporting affects benefits. Additionally, Business Overhead Expense Disability coverage is a valuable addition to protect business operations.

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Frequently Asked Questions

Is disability insurance tax deductible?

You cannot claim a tax deduction for disability insurance premiums. However, it’s worth noting that long-term disability insurance is an excellent way to safeguard your income, with premiums usually ranging from 1% to 3% of your earnings. Would you like to explore disability insurance options?

What will most disability insurance replace?

Disability insurance provides partial income replacement if you cannot work due to disability. However, insurers do not cover the lost income to prevent fraudulent claims.

What is an own occupational disability?

In the “own occupation” definition of disability, a person is deemed disabled when they cannot carry out their job’s essential and primary duties when they become disabled.

Is disability income the same as disability insurance?

Usually, “disability benefits” refers to money the federal government provides, while “disability insurance” refers to money paid by private insurance companies to their clients.

Who and what determines the monthly benefit amount for a disability?

The Social Security Administration (SSA) calculates your payment based on the average amount you earned before becoming disabled. Only your “covered” earnings – the wages your employer deducted for Social Security or FICA – are used to determine your benefit amount.

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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