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2013 Michael Schneider Contracting, Independence

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Health Insurance, Disability Insurance, and Business Insurance, are the most relevent types of insurance for independent contractors. Do you need all three? The answer is it really depends on your situation. 

For many, having adequate health insurance is a critical factor in considering an independent contracting career. The options are there. Knowing what they are and where to find them is the key. You should also be aware of the health care tax deductions for self-employed individuals and businesses. Here are our suggestions and resources for helping you find answers to your health insurance questions.

If ongoing medical care is a necessity (like you have preexisting conditions or a family member has a chronic illness, etc.), consider being a W-2 contractor with a vendor (recruiting or staffing agency). Many vendors offer health insurance as a benefit. You have the flexibility of an independent contractor with the benefits of an employee. The trade-off is a lower bill rate.

Disability insurance is protection for self-employed independent contractors who are the primary income providers in their family. You pay a monthly premium based on a factor of your monthly earnings. In the chance that you are unable to work due to illness or injury, disability insurance provides you with a predefined flow of income during that time. Like any other insurance plan, qualified conditions must be met in order to receive disability benefits. Here are our tips and resources for considering disability insurance.

  • Utilize alumni benefit programs that offer group disability insurance rates.
  • Find disability insurance online at resources like insurance.com.
  • Explore the different types of disability insurance like on statefarm.com.
  • Read about conditions that aren’t covered by disability insurance like on disabilityquotes.com.
  • Are disability insurance proceeds taxable for self-employed independent contractors? In general, IRS says no.
  • Are disability premiums tax deductible? IRS says it depends. No, if insurance is for compensation of earnings, but yes if insurance is for compensation of overhead business expenses.

There are several different types of business insurance coverage. The two most relevant to independent contractors are Professional Liability Insurance (also known as Errors and Omissions Insurance or E&O), and General Liability Insurance. The former covers you in the event you are sued by a client for material damages caused by services you have performed. The latter covers you in the event that you are sued for bodily injury or property damages caused by you (or your employees) while on the client site. Here are our tips and resources for considering either type.

Generally, if you are an unincorporated sole proprietor, your personal assets are liable. If you are an incorporated business entity (LLC, S-corp, etc.), your business assets are liable (but you may still be subject to personal liability depending on your case).

Business insurance applies to either scenario above.