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Short-Term Disability Insurance For Independent Contractors

Short-term disability insurance is ideal for individuals prone to occupational hazards, such as workers in construction, factories, heavy-duty industries, or those involved in public protection/security services. These individuals may find themselves in potentially injurious circumstances and incur significant medical expenses as a result of it. Short-term disability insurance should be prioritized, especially by independent contractors, to offset the risk of unwanted accidents leading to a disability and subsequent loss of income.

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Independent contractors are those who are hired by an organization to oversee a particular project. These individuals are not hired on a permanent basis and, therefore, may not benefit from group insurance coverage offered to regular employees. It becomes twice as necessary for such people to get themselves covered under a term insurance policy with extra protection against disabilities. Short-term disability insurance for independent contractors can help negate the risk of income loss resulting from a temporary disability.

What Is Short-Term Disability Insurance?

Disability insurance helps replace the lost income as a result of a disability. Short-term disability insurance can be referred to as an insurance cover that offers financial assistance to the policyholder in the case of a temporary disability, leading to a loss of income. These policies come with a waiting period of about 14 days. Further, the benefits last for a maximum duration of 2 to 3 years. Given that these policies offer only short-term financial respite, you should be in a position to resume work by the time the coverage ends. 

Benefits Of Short-Term Disability Insurance For Independent Contractors

While it may be liberating to be one’s own boss, independent contractors do not usually have the security of a job that pays a regular income. As grim as it may sound, there may be instances where you have to put yourself to face occupational hazards at the risk of your life. In the unfortunate event that you injure yourself even temporarily, you need a financial safety net to fall back on. A short-term disability insurance policy helps you build that cover to take care of expenses arising out of a partial or temporary disability.

Here are some of the key benefits of short-term disability insurance for independent contractors.

  1. Income replacement for temporary financial relief 

    The idea behind disability insurance is to effectively replace income. With this income replacement strategy in place, you can make sure that there is no financial strain on your dependents to sustain their lives. Throughout your disability, you will receive regular payouts to fund your daily needs.

  2. Cover for medical expenses arising out of disability treatment

    Medical inflation has crippled the financial backbone of families in India. With the short-term disability insurance cover, you are at least in a position to take care of the treatment-related costs. While you spend the insurance benefits on medical expenses, you can use a part of your savings to finance other requirements instead of the whole burden falling on your savings.

  3. Additional rehab incentives with the base cover

    Some disability insurance plans come with rehabilitation benefits that help ensure a smooth transition back into regular work. However, you need to check with the insurer to confirm if your policy comes with these benefits.

  4. Premium waiver benefit 

    Some policies may waive off future premiums payable towards disability insurance, depending on the severity of the situation. Independent contractors can significantly benefit from this feature, given the potential to enjoy the financial payouts without worrying about premium payments to keep the policy in force.

Please note that the abovementioned pointers will differ across insurers and, therefore, should not be construed as definitive. Policy benefits are largely subjective depending on the nature of the disability, age of the policyholder, severity, etc. 

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How To Buy Short-Term Disability Insurance For Independent Contractors?

Nearly all term life insurance policies come with the benefit of adding total, permanent, or partial disability riders. These rider benefits can be availed by paying an extra premium subject to the sum assured under the rider. Note that the disability rider benefit amount cannot exceed the base sum assured under a term life policy. Further, the benefit amount must be in tandem with your income before the disability. Typically, you can expect around 60% to 80% of your income as benefit payout.

There are also several standalone disability insurance covers that can be bought separately. While short-term disability riders with term insurance may seem economical, the coverage is mostly limited to accidental injuries and the degree of disability. Most term plans with disability rider benefits offer only a percentage of the sum assured if the disability is partial. Therefore, if you want comprehensive coverage that effectively covers partial and temporary disabilities, a standalone policy may prove to be more beneficial.

Independent contractors looking to invest in a short-term disability insurance cover should note that you can choose to receive weekly or monthly payouts to replace the temporary loss of income. 

Factors To Consider While Buying Short-Term Disability Insurance

There are certain factors that you should keep in mind before finalizing your short-term disability insurance cover. 

  • Ensure a comprehensive coverage amount depending on the nature of your job as an independent contractor. If the risk of occupational hazards is high, you should consider getting a separate disability cover, and a higher sum assured amount. 

  • Note the cost of short-term disability insurance versus an accidental disability rider. Although the latter may seem more economical, a separate cover guarantees more comprehensive protection. Further, the cost of short-term disability insurance for an independent contractor shall depend on the nature of your job, income, age, and medical history, among other factors.

  • Read the policy terms and conditions carefully to identify the exclusions. Most term insurance covers with disability riders do not cover injuries or deaths arising from war, suicide attempts, adventurous sports, etc. 

  • Claim settlement for short-term or long-term disability insurance will require proof of hospitalization, medical board certified evidence of incapacity, hospital bills, a summary of hospital discharge, duly filled signed form, etc.

  • Confirm the percentage of benefit payout in the case of partial disability. Most insurers do not offer the complete sum assured in the case of temporary/short-term disabilities.

Five things to know before buying Term Plan Five things to know before buying Term Plan

Summing Up!

It is advisable for everyone to get disability insurance to remain financially protected against unwarranted accidents/illnesses leading to income loss, irrespective of their nature of employment. If you are an independent contractor/freelancer, you should have a financial backup to cover expenses that may arise from accidental injuries. Even if the repercussions of the injury are short-term, having a disability cover is especially important if you have dependents to take care of. Getting term insurance with the added protection against partial disabilities can help you mitigate any loss of income without impacting daily finances.

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