Disability Insurance for Gig Workers

Being a gig worker has lots of pluses. Flexible hours. Freedom to choose your work.

It also has its minuses. Lack of job security. Inconsistent income. No benefits, especially to protect you if you get sick or hurt.

Disability insurance is one option that can help. It pays you when you can’t work because of injury or illness.

In this article:

• Who or what is a gig worker?
• Why should gig workers get disability insurance?
• What’s disability insurance?
• Where do you get disability insurance as a gig worker?
• What else do you need to know about disability insurance as a gig worker?
• How much does disability insurance cost?
• How do you choose disability insurance if you’re a gig worker?

Who or What is a Gig Worker?

Gig workers enjoy a lot of independence and can make their job fit their lifestyle. But they also lack the security and benefits of a typical 9-5 job.

They have to buy their own health insurance. They don’t get paid time off or have a company that chips in for a 401k or other retirement plan.

Why should gig workers get disability insurance?

What if you get hurt and can’t work for days, weeks, or months? How would you support yourself and your family during the income drought?

Disability insurance ensures you have a steady supply of money in case you’re injured and can’t work.

It safeguards you from the what if’s of life. And, unfortunately, chances are you might need it. Government data shows that one in four people will become disabled at some point before they can retire at 65.¹

What’s disability insurance?

Disability insurance comes in several types.

First, there’s short-term disability insurance. It can last weeks to months (up to 26 weeks, typically). It pays you a certain percentage of your income (aka the benefit amount) if you can’t work because of a disability.

The most common short-term disability claims stem from:

1. 1. Pregnancies (22.3%)
   2. Musculoskeletal disorders affecting the hips, shoulders, knees, back and spine or other areas (18.5%)
   3. Injuries (e.g., fractures, sprains, and strains) (11.4%)
   4. Digestive disorders (7.4%)
   5. Mental health issues (7.3%).²

Then there’s long-term disability insurance that can last years, even decades. Like the short-term version, it also pays a percentage of your income if you can’t work because of a disability.

The most common long-disability claims stem from:

1. 1. Musculoskeletal disorders affecting the hips, shoulders, knees, back and spine or other areas (27.6%)
   2. Cancer (15.0%)
   3. Injuries such as fractures, sprains, and strains of muscles and ligaments (12.0%)
   4. Mental health issues (9.3%)
   5. Circulatory issue (8.2%)³

Gig workers should know about the next one, accident disability insurance. This version kicks in when you’re injured only and can’t work. It can last up to 90 days and is usually packaged with an accident insurance plan (those provide a one-time, lump sum payment if you get hurt).

How you define disability when you enroll really matters as well. This lets you and your insurance company know the conditions that will entitle you to benefits.

Do you want to be covered in case you can’t do the job you spent years training for? Would you want benefits if you could only work part-time? Or do you want benefits if you can’t work at all?

Where do you get disability insurance as a gig worker?

First, there’s the federal version known as Social Security Disability Insurance. It sends you monthly payments. To qualify as a self-employed individual, you’re eligible if you meet the requirements in three tests. The tests ask if what you’re doing for income is substantial gainful activity, or basically, work for money. It’ll examine what you do, how it compares to others who do it, and what the value is.⁴You’ll also have had to pay your Social Security taxes.

You can also access benefits from state programs if you live in California, Hawaii, New Jersey, New York, and Rhode Island. If you don’t live in those states, you’ll

If you work for a company, your employer typically provides some form of disability insurance also known as group disability insurance.

But if you are a gig worker, independent contractor, or solopreneur, your best option is to purchase private disability insurance. You can buy them from an insurance broker who can spell out the pros and cons of different policies, or you can enroll directly online.

What else do you need to know about disability insurance as a gig worker?

First and most importantly, the benefit amount. This is how much your policy pays you if you’re disabled. Employer-based plans typically have two options: short-term and long-term disability. Short-term disability insurance generally pays between 40% to 70% of your pre-tax earnings. Long-term disability ranges from 40% to 80%. Gig workers who purchase accident disability insurance can expect to receive anywhere from $250 to $750 a month.

Disability insurance comes with waiting periods, also known as the elimination period. It’s basically how long you have to wait before you receive any payments. Typically, this can be anywhere from 30 days to 90 days for employer-based policies.  For gig workers who buy accident disability insurance, it can be from five to 60 days.

Disability insurance also has benefit periods, which are how long payments will take place. You need to establish this when you sign up.

You can add additional options to your policy (aka riders) that can add more benefits and protections.

How much does disability insurance cost?

For accident disability insurance, gig workers can expect to pay 1% or less of their regular income.

The actual price of the policy depends on quite a few things like the kind of policy and benefits you want (benefit amount, benefit period, elimination period) and your age, health, occupation, hobbies, and gender.

How do you choose disability insurance if you’re a gig worker?

First, think about how much you’d need to get monthly to cover your expenses and have a little extra.

Next, decide how long you can go without working before you receive payments from your policy.

Lastly, figure out how long you would want those payments to last. Remember, accident disability insurance plans last up to 90 days.

That will set you up for your general approach to buying disability insurance. Then, it’ll come down to checking the actual price with different insurance companies. If you don’t like what you hear or see, see what you can change to change the price.

Ready to get started?

At Flex Benefits, we build insurance to cover all your needs. We’re ready to help you build the exact disability insurance plan that meets your needs and budget.