This post was written by Hyke. Hyke is an all-in-one business administration platform for the top freelancers. From LLC formation to taxes, Hyke takes away all the pain with paperwork and helps you stay safe, compliant and save on taxes.
When you work as an employee, you don’t often have to think about covering your own health, liability, or property insurance. That’s because your employer takes care of those needs. For people who prefer working for themselves, however, the responsibility of getting all of the insurance they need falls on their shoulders.
Are you a self-employed freelancer? Then you must purchase insurance to protect yourself, and you will likely need more types of coverage than an average employee would. Hey, it’s just part of the cost of being your own boss—and we think it’s worth it!
What are the types of insurance that you’ll need to have in place when you’re a freelancer? Here’s the breakdown:
Business property insurance
Why do you need these insurance policies, and how much will they cost you? Keep reading, as we’ll break it all down for you. This week, we’re starting with health insurance. Stay tuned each week to learn everything you need to know about freelance insurance!
Let’s Start with Health Insurance
Health insurance is super important, but when you run your own freelance business, you won’t have an employer covering the cost for you. This means that, if you don’t have a spouse who can get coverage for you through their employer’s insurance policy, you have to shell out the cash and get it for yourself and your family. (Note: if you’re under 26 years of age, you can also be covered on your parents’ plan.)
When the Affordable Care Act (a.k.a. Obamacare) took effect back in 2014, it became a legal requirement that everyone, including self-employed freelancers, have minimally adequate health coverage. Failing to obtain health insurance led to a penalty from the IRS. Since then, however, Congress has chosen to eliminate this mandate, so starting in 2019, it will no longer be valid.
You’ll still have to prove that you had insurance through 2018, though, when you file your taxes for that year. If you didn’t have coverage for more than two consecutive months at any point in 2018, you might be hit with a penalty called a shared responsibility payment (the max for most people is around $600). Visit the IRS website for all of the details on penalties.
Starting in 2019, you can voluntarily decide whether or not you want health insurance. However, it’s still highly recommended to have some type of coverage, as it could save you from debilitating costs down the line. Especially as a self employed individual, a serious illness or accident that causes you to have to stop working for a period of time could easily lead to major losses - particularly if the medical fees were out of reach even with a steady income.
To get health insurance as a freelancer:
Contact a private health insurer directly. As an alternative, you can even contact an insurance broker who can help you find the right plan.
Seek out business associations or groups. They can help you get insurance, sometimes at favorable rates.
Get individual health insurance through your state’s health insurance exchange (a.k.a. the health insurance marketplace). If you don’t have employees, you can use this strategy to get the insurance that you need, whether you’re a sole proprietor, a partner in a partnership, or the member of an LLC (limited liability company).
The Health Insurance Marketplace
When you head to the website, expect to find a variety of plans from the insurers that are available in your area. Those insurers have negotiated to offer options through the exchange, so you can browse the plans, compare benefits, and find the policy that will give you the insurance you need at the price you can handle.
Thanks to the Affordable Care Act, health insurance providers must offer coverage to everyone, including individuals with preexisting conditions. While this is a major benefit, it has also made some plans more expensive, so be prepared for some high prices when browsing your options.
Fun fact: Every state has an exchange. While some states have created their own exchanges, others have exchanges that are run by the federal government.
You can reduce your health insurance costs as a freelancer!
If you can’t pay for a policy totally out-of-pocket, see if you qualify for healthcare premium tax credits. Your income must be no more than four times the federal poverty rate in order to quality. So, if you’re single, you can’t earn more than about $48,000 to get a credit. If you’re married without kids, you can’t earn more than about $65,000.
The amount of credit you can get depends on your income. No matter what, though, the only way to get this credit is by going through the health insurance exchange—you can’t go directly to an insurance company to qualify.
Want more information? Every state health insurance exchange has a website you can browse, along with a call center that can provide additional support. Click here for links to all 50 state exchanges.
Don’t forget to deduct the cost of your health insurance!
Good news! Whether you’re a sole proprietor, partner, or member of an LLC, you can deduct the cost of health insurance for yourself and your family from your income taxes.
This is actually a special personal deduction that you can take, not a business deduction. And it’s limited to the annual profit that you earn from your business. However, you can get this deduction whether you got your health insurance as an individual or you had your business obtain it.
While health insurance will no longer be mandatory in 2019, it is still a good idea to have at least minimum coverage if possible
Pre existing conditions might make insurance more expensive, but they do not allow insurance companies to turn you away
There are several ways for freelancers to make health insurance more affordable, including premium tax credits, and income deductions.