US Workers Need Disability Coverage More than Ever
May 2018 marks the 12th annual Disability Insurance Awareness Month, a joint campaign sponsored by the Council for Disability Awareness and the insurance industry to highlight the importance of protecting your income in the event of a debilitating condition. The goals of this campaign are to help Americans understand that disabilities occur far more often than any of us would like to believe, and to identify steps they can take to ensure that they are covered for this possibility.
The Growing Disability Coverage Gap
Today, more and more U.S. workers are living paycheck to paycheck. CNBC reports that 57 million Americans have no emergency savings, and only 39% have enough in savings to handle a $1,000 emergency. At the same time, medical costs are rising rapidly, and a growing percentage of workers have high-deductible health plans that would incur large out-of-pocket expenses, if they suffered a catastrophic illness or injury.
With a lack of savings and higher medical costs, American workers rely on their income more than ever to stay afloat. Unfortunately, millions do not have adequate protection in case they are out of work. Statistics from the Council for Disability Awareness show that more than 51 million U.S. households are without disability insurance, other than the basic coverage that Social Security provides.
With so much at stake, it is reasonable to ask why so many Americans choose to go without disability insurance. Some of the primary reasons include:
- They believe they will never need disability coverage;
- They believe disability insurance is too expensive;
- They believe they are already covered through Worker’s Comp and/or Social Security Disability Insurance (SSDI).
The Chances of American Workers Becoming Disabled
While the majority of workers in the U.S. believe their chances of becoming disabled are minimal, the statistics show that the odds are much higher than most people believe. For example, more than one out of four 20-year-old workers can expect to be out of work for at least a year due to a long-term disability before they reach retirement age.
Short-term disabilities are even more frequent. Each year, roughly 6% of working Americans will experience a short-term disability (due to injury, illness, or pregnancy) lasting six months or less. This means that over a four to five decade working career, there is a very good chance you will suffer from at least one short-term disability.
Do not count on Worker’s Compensation or SSDI to cover you if you become disabled. Forbes reports that fewer than 5% of disabling injuries or illnesses are work-related. In addition, less than 25% of SSDI claimants have their applications initially approved. Most claimants are only approved after a complex and protracted appeals process that can take up to 18 months or longer.
Why Employers Should Offer Disability Coverage
A large percentage of American workers are not financially prepared to deal with a debilitating injury or illness. Without income protection in place, they are at risk of severe financial hardship, including bankruptcy. The cost to purchase disability coverage is a legitimate concern, but the more important question is “can I afford not to protect my income?”
Disability insurance rates vary widely depending on if the employee purchases the insurance privately or through an employer-sponsored group plan. Group coverage through an employer is typically more affordable with fewer underwriting requirements. Employers who offer disability coverage provide easier access to the income protection a growing number of their employees need.
Individual disability policies are more comprehensive and offer additional benefits and can be customized for each person’s needs. And the cost for this protection is about 2-3% of your current income. Typically, a carrier will offer a discount when 3 or more policies are purchased by employees at the same company.
Whether you choose group or individual disability insurance, you are choosing to protect your most valuable asset—your ability to earn a living! It is one of the smartest investments you can make.