The Great Resignation: A New Freelancer’s Guide to Insurance
Life has drastically changed throughout the past two years, driving many Texans to make changes in their everyday lives — like quitting their jobs. This movement, coined “The Great Resignation” by a Texas A&M University professor, has gained steam throughout the past few months. In November alone, 4.5 million Americans quit their jobs, according to the U.S. Bureau of Labor Statistics.
Why? The pandemic and its economic consequences have closed many doors, both literally and figuratively — but it has opened new ones, too. Since March 2020, Americans have taken on additional caretaking roles, with children schooling at home and family members needing extra help. The Great Resignation of 2021 (and beyond?) is a symptom of U.S. workers rethinking and reimagining a career with more flexibility and a healthier work-life balance. For some, the solution is self-employment or full-time freelancing.
But such a drastic change in profession means a change in benefits and protection. Here’s how going freelance or self-employed can affect your insurance premiums and the coverage you may need to support your independent career.
Look Before You Leap
Self-employment and full-time freelancing have their pros (flexibility) and cons (self-employment taxes). A benefits package can be one advantage of traditional employment, but don’t let that discourage you. With some research and planning, freelancers and self-employed workers can put together their own benefits package.
Here are seven things to consider when leaving traditional employment:
1. Auto Insurance
You may need specific auto coverage if your self-employment will require frequent driving for business purposes. Depending on your occupation, you might want to consider a commercial auto insurance policy. This kind of coverage is also helpful if your business grows, and you bring on an employee or two who might use a company vehicle. Your Texas Farm Bureau Insurance Agent can help determine the type of coverage you need, whether you’re a baker making deliveries or an electrician driving to clients’ homes.
2. Disability Insurance
Being your own boss has its freedoms but think about what might happen if you’re sick or injured and can’t work for a period of time. Would your savings be enough to pay medical bills and support your family for an undetermined amount of time? Self-employed workers should consider investing in short- and long-term disability policies. Even though it’s difficult to think about, disability impacts more Americans than you might think. A quarter of today’s 20-year-olds will become disabled before reaching age 67, according to the Social Security Administration.
3. Health Insurance
One of the most important decisions faced by self-employed Americans is choosing a health insurance policy. Here are four options:
COBRA coverage. This method allows you to keep your current employer-sponsored health insurance for up to 18 months in most cases. COBRA coverage is expensive because you’ll pay the plan’s full, unsubsidized cost plus a 2% administrative fee. It’s best to use this as a temporary option.
A Parent’s Policy. The Affordable Care Act (ACA) allows those under 26 to remain on a parent’s insurance plan. You don’t have to live with your parent or be considered their dependent to enroll in this coverage. Also, enrollees can be married and have a full-time job that offers benefits.
A Spouse’s Policy. If you’re married, you might be able to join your spouse’s plan. But keep in mind that joining their plan might significantly raise your monthly premiums.
An Individual Health Insurance Plan. Usually, one of the better options for a freelancer is shopping for a health insurance plan on the federal marketplace. This type of plan is purchased by an individual; it is not tied to an employer or government program such as Medicare or Medicaid. Depending on where you live, you can find several options with varying monthly premiums. Individual health plans must cover 10 essential health benefits, including emergency services and preventive care. Open enrollment for this type of plan in Texas is typically between November and January, but certain life events (including going freelance or self-employed) can qualify you to enroll outside of this window.
4. Inland Marine Insurance
A homeowners policy helps cover damage to your home and personal property — but there are coverage limits. For extra protection, consider adding an inland marine, or personal articles, policy to your existing coverage. This kind of coverage picks up where your homeowners policy leaves off — namely for select personal items covered by the policy. Another benefit is that your inland marine deductible is often much cheaper than your homeowners deductible. (For example, your homeowners deductible would be $3,000 if your home is valued at $300,000 with a 1% homeowners deductible.) Ask your Agent if this type of coverage could be right for your self-employment needs.
5. Liability Insurance
No matter if you’re selling merchandise or specific services, you should consider protecting yourself with this type of coverage. A liability policy is especially helpful if your business is based in your home, where you’ll host clients. (This could be helpful for hairstylists, photographers, and babysitters.) While your homeowners policy likely has a built-in liability component, it may not cover claims related to your business. Ask your Agent if a commercial general liability policy is right for your budding business’ needs.
6. Life Insurance
In the event of your death, a life insurance policy helps protect your family’s lifestyle and the business you’ve built. There are advantages to both term life and whole life policies, but a term life policy could be the better option for self-employed individuals. Term life is straightforward and affordable with guaranteed exchange options. You can convert to a whole life policy, which ensures coverage for the rest of your life (as long as you pay the premium). Many term life policies don’t require a medical exam or blood work, but your age, gender, and — in some instances — profession, and/or medical history, can impact your monthly premium.
7. Simplified Employee Pension IRA (SEP-IRA)
One of the perks of a corporate job is a 401(k) that employers sometimes match. When self-employed, your retirement savings are also on your shoulders. Look at an IRA as insurance for your financial future. An SEP-IRA plan doesn’t have the start-up and operating costs of a conventional retirement plan. Also, you can contribute up to 25% of your net earnings in some instances.
Before joining The Great Resignation and leaving your 9-to-5 behind, call your Texas Farm Bureau Agent to set up a 360 Review. You and your Agent can assess your current coverage and determine what you need for this next career milestone.
Coverage and discounts are subject to qualification and policy terms and may vary by situation. © 2022 Texas Farm Bureau Insurance
