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Disability Insurance for the Self-Employed: How Much Coverage Should You Purchase?


What is a disability?

A disability can be classified as anything that prevents you from working. It could be injuries from an accident, a chronic health condition, depression, or cancer. If you’ve had COVID-19 you could develop unforeseen side effects in the future that could prevent you from working. A disability can happen to anyone, so it’s critical to take steps now while you can.

Disability affects more people than you might realize. One in three Canadians will end up using their disability benefits during their working life. As a self-employed person, not only could a disability prevent you from earning a personal income, it could affect your business income as well.

Disabilities can vary. You could be out of work due to long-term health problems, an unexpected heart attack, or a freak accident or injury. Since disability is so common, getting the right disability coverage is critical for any business owner.

What types of disability coverage are there?

There are two types of disability insurance to consider when you are self-employed. Both are critical to ensuring you can keep yourself and your business afloat if you’re ever unable to work. 

Individual Disability Insurance

Individual disability insurance protects your personal expenses such as your housing, food, and other day-to-day expenses. These insurance policies usually cover between 60% to 80% of your salary and is usually tax-free. 

Business Disability Insurance

Business disability insurance helps to keep your business running while you are unable to work. These policies cover up to 100% of fixed business expenses including employee salaries, rent, utilities, and any other expenses. 

How much disability coverage should you purchase?

The amount of coverage you might need depends on whether the policy covers individual or business expenses.

For individual disability coverage, you can estimate your living expenses including:

  • Housing

  • Utilities

  • Food

  • Loan payments

  • Savings

  • Car expenses

  • Childcare

  • And any other expenses

For business disability coverage, estimate your monthly business expenses such as:

  • Rent

  • Property taxes on premises you own

  • Business income taxes

  • Salaries of most employees

  • Utilities including internet

  • Loan interest

  • Vehicle payments

  • Lawyers’ and accountants’ fees

When estimating your expenses, you may also deduct any substantial savings or liquid assets, which could be used to cover your expenses if you are unable to work.

Get a quote 

At Bounc3 we can help you find the most affordable and suitable disability insurance coverage for your personal and business expenses. Get a quote today to protect your hard earned income.