Disability Insurance for Streamers
Last week’s talk on health insurance was super important. However, disability insurance is even more important. I’d say it’s one of the most important but least well known topics I’ve covered yet. Think about it: what would happen to your streaming business if you weren’t able to stream? If you’re a full-time streamer or you’re considering going full time DO NOT SKIP THIS ARTICLE. I promise you, it’s more likely than not to save your ass.
What is disability insurance?
Disability insurance protects your ability to earn income, even if illness or an accident prevents you from working. It’s been called accident insurance or income replacement insurance in the past. So what kinds of things can be covered? Cancer, car accidents, broken hands or jaws, back problems, carpal tunnel, multiple sclerosis, stroke, heart attack, arthritis. Do you know anyone who has, at least at some point in their lives, been unable to work because of one of those issues? Statistically it’s going to be an illness, not an accident, that takes you out.
It’s also different than worker’s compensation. While both provide similar benefits, worker’s compensation is only available if your injury or illness was at the job site or substantially created by your employment situation. Most accidents don’t happen on the worksite and most illnesses don’t happen because of where you work.
As a business owner, you can also find business related disability insurance. The first is overhead disability insurance. It pays the ongoing bills for the company while you’re unable to work. It doesn’t provide any income to you but it prevents you from having to pay those bills. The second is key person disability insurance. This is less relevant for most streamers, but if you had an employee that you were very reliant on you could get disability insurance to help cover their lost production. Both of these would count as business expenses so you’d also get that sweet, sweet tax deduction.
Short vs long term
There are two main types of disability insurance: short-term and long-term. They each serve their purpose and it’s good to have both.
Short-term disability insurance typically kicks in after a week or two and covers you for a couple of months. Unfortunately, there’s not a ton of standardization in the coverage periods. Typically, you can only get short-term disability insurance through an employer. Just recently some companies are selling it to the self-employed as well.
Long-term disability insurance kicks in after you’ve run out of sick time (if employed) and short-term disability insurance. Normally you see a 90 to 120 day elimination period, meaning you can’t get benefits for the first 90 or 120 days of your disability. Sucks, huh? That’s why you need the short-term as well!
You need to look at the elimination period, benefit amount, term, and definition when picking disability insurance. The elimination period is the time between becoming disabled and the policy kicking in, aka that thing we just talked about. The longer the elimination period the lower your cost as you’re delaying when the insurance company has to pay.
Your benefit amount is how much you get per month. We’ll discuss benefit amount best practices in a moment.
The term is how long the payments last once you’re getting disability. It’s possible to get policies that pay until you’re 65 but those are expensive. I’d say it’s more common to buy a policy that pays for 2-3 years after the elimination period ends. That should cover you for most illnesses, though clearly not all. For instance, that generally covers the term of non-terminal cancer but wouldn’t cover something like losing a hand. The cancer can go away but as of yet we can’t re-grow hands.
The last piece is the disability definition. I could write an entire, really boring, article on all of the different factors that go in to it. Basically, one of the things you can choose in the policy is the definition of disability. Is it that you can’t do you own job (own occupation)? Is it that you can’t do any job? It’s more expensive to get a policy that activates when you can’t do you own job but could work in another field. The standard example is surgeons- they could get arthritis that prevents them from performing a surgery but doesn’t prevent them from flipping burgers. If they have an own occupation policy then they’re covered. Other, less expensive policies may not. It’s up to you and your budget to decide which is correct for you.
First, how much of your income should you cover with disability insurance? Generally, you want to replace 60-70% of your income. By “your income” I mean income that you pull out from the business for yourself, so not the business revenue. If your income is $4,000/month then you’d want $2,400-$2,800/month in disability insurance coverage. A really rough rule of thumb is you can expect to pay 1-3% of your annual income on disability insurance. Not bad to spend 1-3% to protect 60-70% if things go wrong! The more you cover, the more expensive the monthly premium is so it’s up to you to decide what it’s worth to you.
You also need to consider the taxability of your plan. If you were getting disability insurance through an employer paying for it then you get taxed on it. If you’re paying for the insurance yourself you don’t get taxed on the payout. As a streamer, you’ll be paying for your own insurance so do your calculations expecting it to be tax free. That’s a major benefit that can dramatically outweigh the cost.
So where can you get disability insurance? Most larger insurance companies carry it and it’s up to you to vet them. I’d suggest using something like PolicyGenius or Nerdwallet (I tend to trust Nerdwallet more) to get a quote and then compare around. LLIS is also a pretty good place to check, they do good work. As I’ve said, there isn’t a ton of standardization in disability insurance. The more quotes you get the more likely you are to find one that works for you.
Why should I care?
Did you know that it’s statistically more likely you’ll become temporarily disabled than it is you will die before you’re retired? I went through some doom and gloom scenarios up there that are unfortunately common. Just recently I had a friend come down with such a bad case of shingles (Google it if you’re brave) that he wasn’t able to work for two weeks. He was lucky to be back to work quickly but any longer and he would have lost income.
The more relevant one is my mom. She missed a lot of work because she had cancer twice. It wasn’t her fault, she was focusing on getting better and was so miserable from chemo that she would have been ineffective at work anyways. Those treatments lasted months. Her work covered her. If you’re a full-time streamer and you get cancer or something else nasty, are you protected? Worker’s comp didn’t cover either of them and it won’t cover you as a streamer. They had good jobs and were prudent with spending but despite those precautions they nearly lost chunks of their income. It could be you.
Another reason you should care is because it’s possible to get disabled more than once. It’s not hard to picture someone who was injured in a car crash later getting unrelated illness. While life insurance only comes in to play one time disability insurance could save you multiple times.
The final reason you should care comes down to where you live. In the US it’s really, really hard to get on Social Security Disability. Their definition of disabled is so harsh that basically you need to be unable to work in any job ever again. You need something to cover the gap between temporary and total disability.
As you find success in your streaming career you should consider disability insurance. It’s awesome that you can make a living doing your own thing but it also opens you up to a lot of risk. If you want to be prudent about your business and personal finances you should consider insuring your income. After all, we probably all know someone who has had an illness or accident that put them out of commission temporarily.
Disability insurance is complicated. If you’ve got questions on disability insurance or other topics grab some time for a free consult with me. It’s dangerous to go alone, take some good advice!