One of the benefits of being self-employed is that we are forced to think about our benefits package. Many employees will accept what they are offered at work without giving much thought to it. If you work for yourself and even if you don’t, you should make sure that you have the benefits package you need. Whether that means creating it from scratch or supplementing the employee benefit package your employer put together for you.
The key elements of a good benefit package includes a source of income when disabled, a source of money to take care of any dependants when you die, a source of income to take care of you when you retire, medical insurance and possibly dental insurance.
Disability Income Insurance
Long term and short disability insurance or some other source of income that doesn’t stop when you are unable to work is an important part of any financial plan. One year out of work can wipe out a lifetime of savings. You are far more likely to be disabled during your working years than you are to die during those years according to statistics. Disability insurance can mean a world of difference to you family. The impact of being unable to work can be tremendous even if it is a short term disability. Health insurance nor other kinds of insurance will pay you an income when you are sick or hurt and unable to work.
The average price of life insurance has come down quite a bit over the last several decades. Most couples who are under 60 or so can purchase substantial protection for less the than cost of their cable TV service. Depending on their needs and health status, this may not be enough to meet all of their needs, but $40 to $80 a month will be more than enough for many, many couples to have good a term plan for both spouses. If you have children or other people who depend on your income, you should have life insurance.
There are few things that bother me more emotionally than seeing a person of retirement age who appears to be working out of necessity as opposed to choice. We should all have a plan that allows us to retire at a reasonable age whether we actually retire or not. A high interest annuity is only one of many choices that you have when it comes to saving for retirement. One essential component of a retirement plan is discipline. Hollywood actors and many other high income earners teach us that any income can be outspent. My parents’ generation, which grew up in the aftermath of the Great Depression, teaches us that you can also choose to save at almost any income level.
Long Term Care
Long term care insurance isn’t just for the senior market. This is not just because some younger people will find themselves in need of care in a nursing home from time to time. It is also because the best way to get a low rate on the policy is to purchase at a younger age. The cost of custodial and intermediate nursing home care is not typically covered by health insurance or Medicare. The cost of nursing home care averages over $1,000 a day in many parts of the country! The government may pay for much of it, but you may be forced to sell of many of your assets before the government steps in. This can ruin the retirement of your surviving spouse. This a little talked about, but important, coverage.
Health and dental insurance are often the only types of coverage that people think about when they lose their benefits package. They are important coverages, but so are the others. Consider purchasing a lower cost high deductible plan to save money.
Dental insurance, unfortunately, is often not available at a good price when you are not part of a big group. Many people are better off paying for dental care out their pockets or purchasing a dental discount plan when they become self-employed. Dental discount plans can sometimes be priced well, but consumers should be aware that they do not offer the same protection.