I hear that at least once a month. Usually from a self-employed person – a contractor, a hairstylist, a freelance graphic designer. They work alone. They don’t get paid if they don’t work. And they think disability insurance is for people who do dangerous things, like roofing or logging.
The guitar teacher’s name was Paul. Forty-three years old. He taught lessons out of his home studio in Evanston, maybe twenty students a week. Also played gigs on weekends – weddings, corporate events, the occasional bar. He was healthy, fit, never missed a day of work. His wife worked part-time at a daycare. They had two kids, a mortgage, a dog.
Paul came to me because he was buying a term life policy – he wanted to make sure his family was okay if he died. We ran the Life Insurance Needs Estimator. Life insurance was easy.
I asked him: “If you broke your hand tomorrow – just your fretting hand – could you teach guitar? Could you play gigs?”
He stopped laughing. “No. I couldn’t do either.”
“How long until you could work again?”
“A broken hand? Maybe three months. Physical therapy maybe longer.”
“Do you have three months of expenses saved up?”
He didn’t. He had about two weeks.
That’s the gap. Most self-employed people don’t have a safety net. No sick days, no short-term disability from an employer, no paid family leave. If they can’t work, the income stops. The mortgage still comes. The grocery bill still comes. The kids still need shoes.
Paul didn’t buy disability that day. He said he’d think about it.
Six months later, he was in a minor car accident on the Kennedy. Not his fault. The other driver ran a red light. Paul’s airbag deployed. He walked away from the crash – no broken bones, no cuts. But his neck and shoulder were wrecked. Whiplash, a herniated disc, nerve pain down his left arm. He couldn’t hold a guitar neck. He couldn’t sit through a lesson without pain. He couldn’t play gigs.
He called me from his kitchen, voice shaky. “Marcus, I can’t work. The insurance from the other driver is taking forever. I don’t know how we’re going to pay the mortgage next month.”
I asked if he had bought disability after our last talk. He said “I meant to. I just kept putting it off.”
That call still haunts me. Because I’ve had it too many times.
So let me walk you through the disability insurance market, especially for self‑employed people in Illinois.
First, the statistics. One in four workers will experience a disability that prevents them from working for at least a year before they retire. That’s not my number – that’s from the Social Security Administration. Most disabilities are not from freak accidents. They’re from back pain, arthritis, cancer, mental health conditions – common things that happen to common people. The average disability claim lasts about three years.
Paul’s neck injury kept him out of work for eight months. Eight months. His wife went full‑time. They drained their savings. They borrowed from his parents. They deferred the mortgage for three months, which added interest. By the time he went back to work, they were around $22,000 in the hole.
If he had bought a disability policy before the accident, the premium would have been around about $80-120 a month, depending on the benefit period and elimination period. For that, he would have received about about 60% of his pre‑disability income – tax‑free if he paid the premium with after‑tax dollars. That would have been about roughly $3,000 a month. Enough to cover the mortgage and groceries.
Eight months of benefits: about $24,000. He would have paid about about $1,000 in premiums over the year. The math is obvious.
So what should self‑employed people look for in a disability policy?
Elimination period. This is the waiting period between when you become disabled and when benefits start. Common options: 30 days, 60 days, 90 days. Longer elimination period = lower premium. If you have savings to cover three months, choose 90 days. If you don’t, choose 30 or 60.
Benefit period. How long will benefits last? Two years, five years, to age 65. For most professionals, to age 65 is recommended – that’s when you might be eligible for Social Security retirement. But that’s expensive. A five‑year benefit period is a reasonable compromise.
Benefit amount. Usually about 60-70% of your pre‑disability income. You can’t insure 100% because then you’d have no incentive to return to work. Most policies cap at about $10,000-15,000 a month.
Own occupation vs. any occupation. Own occupation means you’re considered disabled if you can’t do your specific job – guitar teacher, surgeon, pilot. Any occupation means you’re only considered disabled if you can’t do any job you’re reasonably qualified for – even a desk job. Always buy own occupation.
Partial disability. Some policies pay partial benefits if you can work but at reduced hours or income. This is crucial. Paul could have taught a few lessons a week but not full schedule. Partial disability would have made up the difference.
Residual benefit. Similar to partial disability, but based on actual income loss. If you go back to work at 50% of your pre‑disability income, the policy pays 50% of the benefit.
Non‑cancelable and guaranteed renewable. Non‑cancelable means the insurer cannot raise your premium or change your benefits as long as you pay. Guaranteed renewable means they can raise premiums but only for an entire class of policyholders, not just you. Non‑cancelable is better but more expensive.
Someone I worked with – let’s call her Elena – was a self‑employed massage therapist. She bought a disability policy with a 90‑day elimination period, five‑year benefit period, own occupation. She paid about $75 a month. Two years later, she developed carpal tunnel syndrome. She couldn’t work for 18 months. Her policy paid roughly $3,500 a month for 18 months – about $63,000. Her total premiums paid before disability: about around $1,800. She told me “that was the best money I ever spent.”
Now, what if you have a group disability policy through a spouse’s employer? Those are often cheaper, but they have limitations. Group policies usually cover only about 40-50% of your income. They have longer elimination periods. They are not portable – you lose them if your spouse leaves the job. And they are usually “any occupation” after two years. So you can be a guitar teacher who can’t teach but can answer phones, and they’ll stop paying. Read the fine print.
The Disability Coverage Checker can help you figure out your gap.
The Coverage Gap Calculator also flags disability as a major gap for most self‑employed people.
So here’s your action plan if you’re self‑employed.
First, calculate your monthly expenses. Rent/mortgage, utilities, food, insurance, debt payments. That’s the amount you need to replace.
Second, figure out how much you have in savings. Can you cover three months of expenses? If not, you need a shorter elimination period.
Third, get quotes from two or three disability carriers. The major ones for self‑employed include Guardian, Principal, MassMutual, and Ameritas. Find an independent agent who sells multiple carriers.
Fourth, choose own occupation, to age 65 if possible, with a 60- or 90-day elimination period. Add partial and residual disability riders.
Fifth, pay the premium with after‑tax dollars. Then benefits are tax‑free. If you pay through a business entity, you may need to check with your accountant.
Paul eventually recovered. He went back to teaching and playing. But he’s still paying off the debt from those eight months. He bought a disability policy last year – after the injury. Now his premium is higher because of his pre‑existing condition. He told me “I wish I had listened to you the first time.”
That’s the thing about disability insurance. You don’t think you need it until you do. And when you need it, it’s too late to buy it.
P.S. Elena – the massage therapist – she’s back to work now, reduced schedule. Her policy paid partial disability for another six months while she ramped up. She said “I’m actually glad I went through this. I learned that my body has limits. And I learned that insurance can be a friend.” Not something you hear every day.
By Marcus
