Denial and Disability
“It just won’t happen to me”. And, yet, within a matter of seconds, one’s life can change forever. ANYONE can be involved in traffic accident, have a stroke, or suffer irreparable nerve damage and end up unable to work. The tragedy of such an event would be compounded by the fact that such a risk is insurable and that financial and rehabilitation support could have been available had disability income insurance been in place.
In a recent study sponsored by Sun Life Financial Inc*, it was concluded that a significant proportion of American workers remain unprepared, uninsured, or underisured against short- (STD) or long-term disability (LTD). Further, a shift in workplace benefits offerings will result in employers giving workers the responsibility to decide whether to purchase group benefits such as disability, life, vision and dental insurance on their own. The study suggests that most won’t.
In the report, Robert E. Klein Jr., vice president of Voluntary Benefits for Life Financial said, “We must educate the U.S. workforce to understand the financial risks of long-term disability and learn best practices to mitigate their risks. If 10 couples gather for a barbecue, we estimate that roughly three of them will have a partner who experiences a disability lasting one year or longer during their professional lifetimes.”
Among the report’s findings:
• At least one-third of surveyed full-time workers lack long-term disability insurance at this time.
• Over one-third of workers whose employers offered them the option to pay for group long-term disability insurance declined to buy it.
• Workers who don’t buy group voluntary long-term disability coverage fall into three categories: The Gambler, who doesn’t think the risk justifies the cost of premiums; The Mole, who hasn’t considered the issue and so remains blind to solutions; and The Ostrich, who finds the thought of disability too unpleasant to face.
• Workers under age fifty, minorities, men, and tech workers are more likely to have purchased long-term disability insurance than other respondents.
• Many workers don’t understand key features of long term disability insurance, and fail to anticipate how a disability may raise monthly living expenses.
“Because employers are footing less and less of the overall group insurance bill, workers in our country must take proactive steps to mitigate the financial risk of long-term disability,” said Michael E. Shunney, senior vice president and general manager of Sun Life Financial’s U.S. Employee Benefits Group Division.
It should be noted that even the best group long-term disability is not as benefit-rich as an individually-owned disability income policy and is not likely to be portable. (Although technically “health insurance”, Group LTD is not covered by COBRA). Also, group LTD typically has a cap on how much it will pay (replace income) per month. The more a worker makes, the less of a percentage of his/her income can be replaced by STD or LTD.
If one is working full-time, the perfect time to buy an individually-owned disability income policy with options to purchase more coverage in the future without the need to medically qualify is between the ages of 25 – 40. After that, premiums start to become more and more expensive. Also, rates for women are higher than for men due to claims experience and the fact that fewer women than men buy DI. It is even more important that working women buy their own DI as early in their working life as possible.
*”Will Workers In America Hope To Dodge The Bullet, Remain Blind To The Risks, Or Simply Hide? Perceptions, Misconceptions, And Best Practices About Long-Term Disability”, May 15, 2010, based upon a survey of over 2,000 workers across the U.S. conducted for Sun Life Financial by Kelton Research.
