Full-time employees often don’t realize how much of their compensation comes from benefits rather than salary. Roughly 30% of a typical compensation package goes toward things like health insurance, disability coverage, life insurance, and 401(k) matching. Nearly a third of U.S. workers are self-employed or work for someone who is, which means they’re building that package themselves, usually without a company to subsidize it. Businesses under 50 employees aren’t required to offer health insurance, and many skip a 401(k) plan because of the cost and administrative complexity.
Health, dental, and vision coverage
Skipping health insurance isn’t an option worth considering, even if you’re young and healthy. You’ll also owe a penalty for any month you and your dependents go uncovered. A few places to start looking: your state’s marketplace through Healthcare.gov, where you may qualify for premium tax credits below certain income thresholds; major insurers like United, Cigna, and Humana, which all offer individual and family plans; Blue Cross Blue Shield, a network of 36 companies offering health and dental coverage; and the Freelancers Union, which offers group rates and can be worth checking even if you don’t end up using it. A health insurance broker can also help narrow the options, and since they’re paid by the insurer rather than you, the service itself is free, though it’s worth sticking to the coverage features you actually need rather than what they’re pushing.
Disability insurance
Protecting your ability to earn is arguably more urgent than most people treat it. If illness or injury keeps you out of work for months, disability insurance replaces enough income to keep you afloat, and for the self-employed, that protection matters even more, since the business often stops functioning without you. Group coverage through a professional organization or the Freelancers Union tends to be more affordable, though the definition of “disabled” can be broader and less generous. An insurance agent can help size the coverage to your actual needs.
Life insurance
If you’ve taken out a business loan, a lender may require a life insurance policy to cover business losses if you pass away. Sole proprietors in particular should think about this, since personal assets can be on the hook for business debts. Term life insurance, a policy with a fixed term (20, 25, or 30 years) and a straightforward death benefit, is generally the better fit for younger buyers over whole or universal life products, which carry high premiums and comparatively low coverage. The difference in premium cost between term and whole life is often better used by investing it directly.
Paid time off
Going without a paycheck on vacation catches a lot of new business owners off guard. A few ways to plan for it: build the lower effective work-year (often 50 weeks or fewer) into your income projections rather than assuming 52 full weeks of pay; set up a dedicated “time off” savings account so bills still get paid during a week away from work; and budget specifically for travel, since the cost of the trip and the lost income both hit at once. None of this means skipping time off. Burnout costs more than the short-term income hit, both to you and to the people relying on your work.
Educational only, not tax, legal, or investment advice. Check primary sources and speak with a qualified professional before making financial decisions.
