Freedom and flexibility are two words that come to mind when thinking about entrepreneurship. By taking the plunge and committing to work for yourself, you have more autonomy over your career, but with this freedom comes more responsibility. One of the biggest obstacles to entrepreneurship is managing cash flow, which is why some entrepreneurs decide to forgo certain benefits that are offered in a traditional workplace. While not all types of insurance and benefits are necessary to obtain, there are a few that are specifically important to protect both your personal and business needs.
One of the most important types of benefits to secure as an entrepreneur is health insurance. When you’re employed by a company, you are usually offered some kind of employer-sponsored health insurance. This type of insurance is usually more convenient (and less expensive) to secure with an employer because you can go directly through your company and the insurance is taken directly out of your paycheck before taxes. Additionally, because the company is paying for a portion of the policy, the premiums are typically less expensive than purchasing a policy out of pocket.
Even though it can be a bit more difficult and requires more time and research to secure a policy on your own, as an entrepreneur, it is an important benefit to have. There are a few different routes that you can take to secure a policy. One of the most convenient ways to obtain a policy is to be put on a spouse’s plan if they have the option to do so through their employer. If this is not an option, you could look into options through the federal government’s Health Insurance Marketplace.
After providing your information, you will be given different policy options to choose from. If you are younger and relatively healthy, it could be beneficial to secure a catastrophic plan to protect you as well as your business from financial hardship rather than forgoing health insurance altogether.
Even if you are young, it is important to secure some type of life insurance policy as an entrepreneur. Since the main purpose of life insurance is to replace lost income if you were to unexpectedly pass away, securing this type of benefit is especially important for entrepreneurs that have a family they provide for. Additionally, the younger you purchase a policy, the less expensive the premiums are likely to be as age is taken into account when determining a premium amount. When you decide to purchase life insurance, you will have to decide between term life and whole life insurance policies. Term life insurance tends to be less expensive because the policy ends after a certain amount of time, whereas whole life insurance covers you for your entire life while also building cash value that can be drawn against at a later time.
For entrepreneurs just starting out, a term life insurance policy could be a good option because the cost of the monthly premiums is not as high. Since your yearly income can be difficult to project in the beginning, it can be helpful to reevaluate the policy as your needs change and the business grows.
Being an entrepreneur, you understand more than anyone the needs of your business and how to manage cash flow. Because of this, if you were to get injured or severely ill, it could mean negative repercussions for your business if you don’t have a backup plan already in place. This is why disability insurance is another important benefit to secure as an entrepreneur.
Disability insurance serves the purpose of providing an income replacement if you were too injured to work. While disability insurance won’t cover your entire salary, it can provide enough to keep you afloat during an unprecedented time. To prevent having to tap into your own personal accounts, racking up credit card debt, or having to take out a loan because of an injury, it can be helpful to have an emergency savings account built up in addition to having a disability insurance policy.
Business insurance refers to a variety of different types of coverages to protect your business. These different types of insurances provide protection for any gaps in your coverage that you might have. For example, if your company occupies a physical location, you may need some kind of property insurance. Additionally, once you hire employees, you will need to find some type of workers’ compensation insurance. While not every type of business insurance is necessary to obtain, it is important to understand that it is always better to plan for the unexpected and not cut corners in the areas that are most important to the business.
While it might seem like a long way off, remember to be diligent about planning for retirement. One of the best benefits of working in a traditional workplace is having a retirement plan with a company match built into your benefits package. As an entrepreneur, however, the responsibility to obtain a retirement plan and contribute regularly falls on your shoulders. There are different options for setting up a retirement savings plan and you can always start small then contribute more once your business starts earning more income.
When taking the plunge to become an entrepreneur, you are going to have freedom and flexibility that is near impossible to find in a traditional workplace. With this newfound freedom, remember to be diligent about future financial planning, for both your personal and business needs, to ensure long-term stability and success.