If you were unable to work because of a long-term disability, how would you provide for yourself financially? The results of a new survey released May 12 by the non-profit LIFE Foundation show that nearly 80 percent of working Americans say they would turn to their employer or the government for financial support in the event of a disabling illness or injury, rather than disability insurance purchased on their own.
Released in support of May’s designation as Disability Insurance Awareness Month, these findings suggest that far too many working Americans are leaving themselves financially vulnerable by not having the disability insurance protection they need.
"Most people have a false sense of security when it comes to being financially prepared for a long-term disability. The reality is the majority of workers do not have disability coverage through work, and disability benefits offered by the government, such as Social Security or workers' compensation, can be difficult to qualify for," said Matthew S. Tassey, CLU, LUTCF, past chair of the LIFE Foundation. "If you work for a living, you must recognize that your ability to work and earn an income is one of your most valuable assets and must be adequately insured. Disability insurance is the only coverage that will work when you can't, to replace your income in the event you become ill or injured and can't do your job."
Survey Findings
Conducted by KRC Research between April 4-7, the LIFE survey asked 520 working adult Americans (employed either full- or part-time) which source of financial support they would rely on most if they were to become disabled for one year or more. The LIFE Foundation reviews how consumers responded to help dispel some of the most common misconceptions and encourage people to evaluate their disability insurance coverage needs:
· Thirty-five percent say they would rely on employer-sponsored disability insurance coverage if they were to become disabled for one year or more. While coverage provided by employers is the main source of disability income protection in the United States, most employers don't provide disability insurance as an employee benefit. According to the U.S. Department of Labor, less than 30 percent of U.S. workers have access to long-term disability coverage through work and only about 37 percent have access to short-term disability coverage. Short-term coverage typically pays a significant portion of your income for up to 90 days, while long-term coverage pays 40 to 60 percent of your base pay (before taxes) for longer periods. Even if you're fortunate enough to have both types of group coverage through your employer, you need to make sure that it would be sufficient to satisfy your income replacement needs. If your employer doesn't provide group coverage, it may offer disability insurance through what is called a voluntary program. Check with your human resources administrator to see what coverage and purchase options your company plan provides.
· Thirty-one percent say they would rely on government-provided benefits. According to the Social Security Administration, in 2005 roughly 60 percent of people who applied for Social Security disability benefits were initially denied. Eligibility depends not on whether or not you can perform the functions of your occupation but if you are able to work at all, and if your condition is expected to last a year or more or to result in death. If you do qualify, it takes five months or longer for benefits to kick in and, on average, Social Security pays out just over $1,000 a month, just barely above the poverty line.
· Thirteen percent say they would turn to Workers' Compensation. Workers' Compensation only covers you if you get injured, ill or die as a result of your job and only 10 percent of disabilities actually occur on the job. Even if the disability occurs at work, Workers' compensation payments are sometimes quite modest, and some applicants won't qualify for any benefits at all. Having disability coverage – through work or on your own – is the best way to ensure that you'll be financially protected in the event you become disabled outside of the job.
· Eleven percent would rely on disability insurance they had purchased on their own. The risks of suffering a disability are real – nearly one out of every three workers will suffer a disability that keeps them out of work for 90 days or longer at some point in their career. Despite the statistics, there are only 6 million individual disability insurance policies in force for a U.S. workforce of 146.3 million. Just as you would insure your home, car or other valuable asset, it's important to insure your paycheck, as well.
Making sure you have sufficient disability income protection could be a daunting task if you had to do it on your own. Fortunately, there are resources available that can help. For more information and tools on how to get started, visit the disability insurance section of LIFE's Web site at www.lifehappens.org/disabilityinsurance.
You'll also find an online calculator that allows you to determine for yourself about how much disability insurance you need. Just go to www.lifehappens.org/disabilitycalculator.
Afterward, consult with your human resources administrator at work or a qualified insurance professional in your community. They can explain your various options and help you put together an insurance program that will protect you in the event of a disabling injury or illness.
About Disability Insurance Awareness Month
Disability Insurance Awareness Month (DIAM) was created to get American workers to think about the need to protect their greatest asset - their ability to earn an income. Held in May, DIAM is an industry-wide effort that is coordinated by the non-profit LIFE Foundation.