People are natural optimists. For most unthinkable situations the general response is: “it can’t happen to me”. In truth, disabilities can affect anyone ranging from mild to debilitating. Disability insurance is a type of protection paying a portion of income in case of disability. The majority of American workers lack disability insurance and many are unaware the coverage is available. LIMRA, a group of financial and insurance professionals conducted a recent survey on employee insurance protection. 65% of respondents recommended disability insurance for employees, yet only 48% felt a personal need. Of those, a mere 20% actually carried disability insurance leaving the vast majority at-risk in case of the unexpected.
The annual benefits open season is here. Disability insurance may be something to think about adding to benefits packages to add a safety net to coverage. As companies become more competitive with recruitment, this may be an automatic enrollment for many employees. Check with a human resources representative to see about automatic coverage; there may be new additions to benefits packages this season. Disability insurance may be less-glamorous than some other benefits out there yet the payoffs may far outweigh them. Disability insurance is a safety net for truly, often compensating up to 50-60% of annual revenue while disabled.
Individual policy protection will vary depending on the insurance carrier and company options. Many long-term disability insurance policies have a waiting period before taking effect, in some cases up to six months. For protection during this period, short-term disability policies fill the gap. A broken arm or illness can affect weeks or months of work and income yet cancers and musculoskeletal afflictions can last years. Most people lack the savings to support the lost income through this time.
According to the Social Security Administration, 25% of those entering the workforce will be disabled prior to reaching retirement. At one-in-four odds, chances are high enough to consider adding a layer of protection. A 2015 survey by the Federal Reserve Board found nearly half of Americans lack emergency savings. Asked about a hypothetical $400 emergency expense, 46% of those surveyed claimed inability to match that amount. Months or years of lost income due to serious illness or disability would likely cripple them.
A growing number of companies include disability insurance as part of employee packages. LIMRA states 41% of companies offer disability insurance with larger companies leading the way. Depending on the organization, this may be a voluntary option or paid incentive. For employees paying their own premium, the cost is generally affordable with annual costs as low as $250-$300. Employees paying a premium with post-tax income may have more coming in the future if a claim is filed. Employees paying policy premiums may qualify for tax-free benefit payouts in case of a claim.
The benefits of paying for a policy come with a catch, says Carol Harnett, president of the Council for Disability Awareness. She worries employees, when faced with a long list of insurance options, tend to skip disability coverage in favor of more-attractive or less-expensive options. The solution may lie in auto-enrollment into voluntary programs. Leaving it to the employee to opt-out increases participation up to 45% more than opt-in disability insurance programs. Enrolling early is recommended as more companies include health evaluations for coverage. Pre-existing health conditions may affect qualification for long-term disability insurance. Speak to an agent for more information on disability insurance and create a safety net for the future.
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