Exposed without Company: The Question of Insurance

My final days with my employer run out and my vacation is spent preparing for the full madness of my new career as an independent contractor.  And I’m suddenly very conscious of all the stuff that was invisible and taken care of for me by my former employer.

It’s a surprise, honestly.  All this time, I’ve never felt I was getting any value out of my benefits package; certainly not enough to justify the deductions they were taking.  I’m young(ish), and fortunate enough to be solidly healthy.  So the care and medication benefits aren’t something I take advantage of.  I can’t shake the feeling of vanity that comes if I consider straightening my teeth, so I just carry on with just maintenance dental care.  And the one benefit I’m keenly interested in doesn’t actually cover the cost of getting non-coke-bottle glasses.

On the *rare* occasions when I thought of it, I didn’t care very much for it.  And as a Canadian, I get a government funded plan that covers the necessities.  So here I am, an independent contractor, and I now can just keep my money. It’s great.  I’m free!  Free as a bird.

Except then my brain taps me on the shoulder and says to me in a very cultured British accent, “That’s all well and good, but what if you got hit by a car before tea?”

Well, then I go to the hospital, I answered.  I have my government health insurance.  They’ll cover me till I can walk again.

“Of course, but then if you’re at the hospital, exactly who is at your job, earning your daily bread?”

Oh. I told my brain.  You raise an interesting point.  Cool accent, by the way.

I used to have sick days, and disability insurance in those benefits.  Now I have nothing at all.  Which is fine, but only as long as nothing goes wrong.  And I respect Murphy’s law.   Therefore:

A smart freelancer MUST have Insurance

Something can always go wrong.  If you’re lucky, it will be small and you can take it in stride.  But if your legs are what’s gone wrong, you’re not going to be striding much and you’ll need a Plan B.

Insurance is Plan B.  But the question becomes how much.  A lot of insurance sounds great till you get to the price tag.  But if you don’t get enough insurance it’s not going to do you a lot of good.

I will be seeking more expert help in determining my needs, but in the meantime, maybe I can figure out an estimate from what I used to be covered by.

As I see it, my employer covered two different sorts of circumstances.  First, personal insurance, against my well-being and future.  And second business insurance.

Your Business is You

I’m sure anybody who has had a job has run into a situation where a higher-up was scolding someone for doing something boneheaded because “Our insurance won’t cover that!”  Businesses have insurance against harm, just like individuals do.  And businesses that have customers also insure themselves against customer harm, just in case the customer trips on the copy cup they just tossed on the floor and pokes and eye out.

Now me, I’m a freelance contractor, but the work I do is elsewhere.  I will be going to my client’s offices to work, and nobody else will be in mine, so I don’t need this kind of insurance.

On the other hand, the reason clients used to pay my employers rates for my time was because my employer had insurance that covered the case where things go wrong.  That’s liability insurance, and that’s “maybe” sort of insurance.  I have an agent, and my agent is supposed to insure me against the client, as a subcontractor.  But if anything ever happened, the agent’s insurance would likely then sue me to recover costs.  So I think maybe I need this.

And come to think of it, there’s also business property insurance.  I have a lot of computer equipment that the business will depend on.  If my house burned down, I’d need to replace it. On the other hand, given how fast computer equipment loses value, I’m actually thinking that it’s just not cost-effective to insure everything.  So instead, I’m going to just reserve a portion of my funds as self-insurance, and that way if I drop my laptop, I just buy a replacement without fussing.

Your Product is You.  Don’t run out

As a freelancer, the number one thing I’m selling is me.  I’m selling my skill, and experience.  Which means I need to take care of me, and that means I need personal coverage.  From my employer, personal coverage consisted primarily of:

• Basic Medical Benefits
• Short-Term Disability Insurance
• Long-Term Disability Insurance

The long-term versus short-term was one that I’m embarrassed to admit I didn’t really understand till someone explained it in small words:   Short term insurance is essentially the stuff that gets you past a hospital stay.  Whereas the long-term is essentially income replacement in case the doctors can’t get you back to your work.

One trick of the long-term to watch out for is that it’s usually effective based on your inability to work a job.  But depending on what paper you get, a “job” could be at your local McMegaMart which is a far cry from the sophisticated computing professional that I am today.  So I’m watching out for “professional” job or equivalent wording.

Now, I was thinking I’d skip the basic medical.  For how much I use it, it’d be cheaper to just pay the dentist and optician out of pocket.  And then a friend told me about the cost of medication for diabetes.

People won’t bet when the race is done

The insurance company only offers us these things because they’re betting against us having the issues we’re covering.  At the point where you *need* insurance, they’re not nearly as interested in your business and might either refuse or make you pay through the nose.  And I’m young and beautiful(ish) now, but what if I’m wrong and it doesn’t last forever?  What if that toilet that falls out of the space station leaves me needing complex drug therapies for years?

So it makes sense to get insurance now.   By not needing it, I can get it for cheaper.  And unlike a new iPod, the value of the choice will increase with time.

I guess I need to buy some insurance now

The self-insurance idea I mentioned is an important one.  It’s a way of really keeping the costs of insurance down.  But on the other hand, it’d take a long time for me to afford insuring a car or a house.

There are other ways of keeping the costs down.  Higher deductibles, if you’re able to manage your emergency funds.  Getting lower amounts of coverage is an important trick because insurance plays to our fears and sometimes we insure the wrong things or for situations that don’t make sense.

But I’m going to contact a few companies and see what my options are.  My goal is to resolve matters in the next few weeks.

I hope this hasn’t been too boring.  I thought it might be interesting to share some of what I’m working through as I do the small business experience.

Please feel free to leave a comment, or to contact me if there’s anything you’d like to discuss, or if there’s something you’d like me to talk about.

Photo by Daveybot