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More than 50 million U.S. workers lack any disability income protection.

By John Chartier

May 06, 2019

If we’re honest with ourselves, disability insurance is one of those things we gloss over as we review our annual enrollment choices. Besides, many of us get the workers’ compensation our employers are required to carry, and the government provides disability insurance, so we’re covered right?

Not necessarily.

Workers’ compensation and Social Security Disability Insurance (SSDI) do not cover most challenges workers are likely to face, new Prudential-sponsored research finds. Combine that with the fact that about half of all Americans across the socioeconomic spectrum struggle to meet daily living expenses and don’t have enough savings to cover a $400 emergency, and the consequences of a disabling event are amplified.

“Most people can’t afford a loss of income resulting from a short- or long-term disability, and that increases financial stress,” says Leston Welsh, head of Disability and Absence Management for Prudential Group Insurance. “It’s a bit of a catch-22 situation—financial stress increases the risk of experiencing a disability.”

Disability insurance is the most often overlooked part of an employees’ benefits package, according to Prudential’s new white paper “Why Disability Income Protection Should Be Part of Your Financial Wellness Toolkit,” released to mark the start of Disability Insurance Awareness Month. Although 78 percent of employers surveyed offer short-term disability benefits to their employees and 63 percent offer long-term disability benefits, more than 50 million U.S. workers lack any disability income protection, according to the International Foundation of Employee Benefit Plans.

The question is, why? Part of the reason is many workers believe they will not become disabled and that they are already covered by workers’ compensation and Social Security Disability Insurance. But that’s a myth. Workers’ Compensation only covers accidents or injuries that happen at work. And in 2018, the average SSDI benefit paid just $14,364 a year—barely above poverty level. Plus, applying for SSDI is a rigorous and time-consuming process that can take up two years for approval.

Below are other myths that keep people from buying disability insurance:

  • I’m a millennial, so the chances of me needing disability insurance are slim.

Anyone can experience a disability that takes them away from work. In fact, 25 percent of people in their 20s are likely to experience a disability at some point in their life. That’s one in four Americans, according to the Social Security Administration.

  • Signing up for disability insurance is time-consuming, costly and I’ll have to take a medical exam.

Applying for group disability insurance involves filling out a simple two- or three-question online “evidence of insurability” form and does not require a medical exam. Employers can also make it easier for employees by auto-enrolling them into disability insurance plans. At the end of 2018, the U.S. Department of Labor issued guidance on the use of automatic enrollment for welfare benefit plans subject to ERISA, such as disability and life insurance.

  • Signing up for disability insurance is most commonly for catastrophic events, which are unlikely to happen to me.

The most common reasons workers go out on disability are maternity leave, complications from maternity, back injuries and digestive disorders. None of these are rare, and they can impact someone in any line of work.

  • I have adequate savings, so I should be fine.

One year of being totally disabled could wipe out 10 years of savings. Research from Prosperity Now finds homeowners with disabilities have a greater chance of falling behind in paying bills. Nearly half of all foreclosures on conventional mortgages are caused by a disability.

The fact is, disability insurance protects workers and their families from the risk of long-term financial damage when a disability renders them unable to work. For employers, who often lose billions in productivity each year due to workers who are unable to work, encouraging more employees to sign up for benefits through automatic enrollment, increased communication, and financial wellness education can make it easier for employees to focus on their recovery—not their finances—and return to work.

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Insurance policies contain exclusions, limitations, reductions in benefits, and terms for keeping them in force. A financial professional can provide you with costs and complete details.


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Monique Freeman