Self Employed Therapists and Disability Insurance: What you Need to Know!

Raise your hand if you forgot about this one? That probably means that you have been lucky enough to not need to think about it. Thankfully, the majority of us have never needed to inquire about disability insurance.

Last month I helped a client qualify for short term disability. The process was quick and very impressive by his employer, but it made me realize— I don’t have an employer! And if I found myself in a situation where I am unable to work, what would I do?

In a normal, you working for the Man full time situation, if you needed to go on disability, your employer normally would have you covered. Perhaps you have never considered disability insurance, because it has never been offered to you. It is not required of your employer to offer disability benefits, but the good ones will offer this to make the benefits of the job more appealing.

Is disability insurance necessary for a private practice therapist?

Even though the chances of actually needing disability insurance appears to be low, statistically 5.6% of working Americans will experience short term disability within their lifetime. Disability covers a multitude of ailments: injury, sickness, and even acute mental health disorders.

If you are a healthy person that has never needed to take an extended amount of time off, then it may not feel necessary to cover yourself with disability insurance. However, the world is filled with unknowns. Case in point, we just went through a world pandemic! I don’t recall any predictions of what 2020 would bring from the psychics or prophets of the world. We can’t live in fear of the worst case scenario, but we should be prepared. Disability insurance is just that.

It is important to note that our job as therapists is very emotionally draining. In the horrible circumstance that something happens in your own life that requires you to step down from your therapist role, short-term disability could make this transition a possibility. In the event of a terrible loss in your life, attempting to care for your clients is dangerous for both you and them.

What is the difference between Short Term and Long Term Disability?

Short term disability insurance comes into play when you are out of work for more than six weeks, but less than a year. Pregnancy actually accounts for a quarter of short term disability claims.* Short term disability may come in handy if you have long term health issues from Covid-19, or get into a car accident and need rehab.

Long term disability is for situations where you may be out of work for more than a year. Almost 90% of long term disability claims are from illness, not accidents as you might expect.*

Many people start off with short term disability, and find that they need more time, long term disability insurance makes this possible.

Long Term Disability and Social Security Disability Insurance (SSDI) Benefits

This is different than private disability coverage - this is a benefit that you have paid into through payroll taxes over all of your working years. SSDI is also a different governmental program from the Social Security benefit that you have been paying into, but they are both managed by the Social Security Administration.

The SSDI benefit is based on your average income over the span of your working career. This benefit has been paid into by your own annual taxes. Take note, this may not be a livable wage, depending on the cost of living of where you are. I have also heard that the application process can be discouraging; it may even take two or three tried before you get approved.

Once you are approved for SSDI, you are good until age 65, and then hopefully your social security retirement benefits will kick in. But honestly, I am not an expert in this and rumor has it that this may not be available for much longer. This is another reason why getting your own insurance is a good idea. You can apply for SSDI at the Social Security Administration’s website.

How do I provide this benefit for myself if I am self employed?

There are many companies out there that offer disability insurance for self employed individuals.

Your insurance provider will require a note from your primary care provider or other speciality overseeing the disability. This is the only thing that will really hold up the process; you may need to track down your providers on your own and encourage them to respond to the insurance company promptly.

Waiting period is a caveat of disability insurance; you may need to wait a number of days or weeks between incurring the disability, and receiving your benefits. You have a choice here, the longer the waiting period, the cheaper your monthly premium; and that shorter the waiting period, the more pricey the monthly premium will become.

Your monthly income benefit will depend on your insurance policy. It seems that 60% is the norm, but it may be worth opting for a better policy to have 100% of your income— especially if you are acquiring some unplanned medical bills.

I chose to use Northwestern Mutual for my own disability insurance (not an add, just the choice I made). Investopedia rated Northwestern Mutual Best Overall and Very Well Health rated them for the Best Income Replacement. The process was pretty easy, and the customer service was very friendly.

TL;DR

As a self employed individual, you will need to arrange for disability insurance on your own; no employer will cover in the event that you can’t work.

Although small, there is a real chance that you will need to use your short term disability benefits. Pregnancy, mental health distress, accidents and illness are all eligible reasons for using these benefits.

Short Term Disability is used when you are out of work for more than six weeks, but less than six months. Long Term Disability is needed for any leave longer than six months.

Social Security Disability Insurance (SSDI) is a governmental program that you have been paying into over your working career through payroll taxes. This can be utilized for Long Term Disability, but is rumored to be a challenge to acquire.

As a self employed individual, you can purchase your own private disability insurance for a low monthly cost. This is a good idea!