If you are self-employed or own a small business with a few employees, health is a constant concern. The trend among small businesses in the last couple of decades has been to scale back or completely eliminate health coverage for employees to try to keep costs at minimum.
This type of thinking could be disastrous for your company. Insurance policies exist that 1) you can afford and 2) could save your business from failing. If you’ve found yourself looking for self-employed health insurance alternatives, you might want to consider one of the following four options.
…most people don't want to discuss a partner death when a new business is launched…
1. Buy-Sell Agreement
A buy-sell agreement is a type of agreement created to protect your business and family in case something happens to you or a business partner. Also known as a buyout agreement, or simply a “business will,” a buy-sell agreement lays out exactly what happens if a co-owner or shareholder of a business dies, is disabled, or leaves the company. These agreements are often backed by life insurance policies, which are used to compensate the family of a deceased shareholder for their stake in the company.
Because most people don't want to discuss a partner death when a new business is launched, they leave themselves open to one of the most damaging events in the life of any small business. “If you are a business owner with a partner or multiple partners, a buy-sell agreement can protect you in case of partnership changes,” says independent insurance agent Andrew Pibal . A buy-sell agreement, Pibal advises, will prevent these unforeseen but very real problems from sinking your business.
2. Key-Man or Key-Person Insurance
Apart from the co-owners of a business, there are other key employees whose value to the business is almost irreplaceable. This would include employees in positions such as shop foreman, lead programmer, head designer, chief engineer, etc. These are known as “key men” or “key people.” Key person insurance is a life insurance policy taken out by the company on this employee, and is intended to help the company deal with the death, disability, or incapacity of such an important person in the business.
“The goal of key person insurance is simple: to help the company survive when the key person who makes the business work passes away,” says Andrew Pibal.
3. Determining Coverage for the Self-Employed
One option for the self employed is to have your business pay your health insurance. If you have dependents, you may think that you should have them all under your policy. But there's no real reason to do that unless you can find a policy somewhere that makes financial sense. Think about it: If you want to keep your business overhead down — and who doesn't? — having the business just pay for your health coverage may be the way to go.
There are a lot of options for covering your spouse and offspring. For instance, if you're just launching a business, you may want to put your teenage or college-bound kids on short-term health plans. These are extremely affordable and can be renewed for up to a year. This will save you money as your business gains traction; you can find longer term coverage for them later. If your spouse is healthy, you can probably get a reasonable policy outside the business coverage.
4. Basic Coverage Options for Your Employees
Fewer small businesses than ever are offering insurance coverage to their employees. But does the savings of coverage for a handful of people upon whom you depend for your success really outweigh the benefits of health insurance?
a) Health insurance is an awesome recruiting tool these days. If one of your competitors does not offer it, you might be able to lure away a couple of that company's top employees by sweetening the deal with coverage.
b) You don't have to offer a comprehensive package to get someone's attention. Employees are willing to participate in paying for the coverage in order to have something to at least keep them financially sound in the event of huge medical bills.
c) If you don't have a plan now, offering one to employees can mean the difference between keeping good people and losing them to a competitor.
d) Health coverage tends to keep people healthy. You want your key employees (and for a small business, chances are high that every employee is key) to be able to visit the doctor, get an annual physical, have medical care at the front end of a health issue rather than the back end, and be protected from a the financial risk of a major medical crisis. Healthy workers are happy workers (most of the time).