Why Your Employees Need Long-Term Disability Benefits

Many workers underestimate the impact a disability can have on their finances. Although the average long-term disability lasts more than two years, 68 percent of workers age 21-35 have funds available to cover only three months or less of normal living expenses. Long-term disability insurance can mean the difference between financial survival and bankruptcy if a disability affects a family breadwinner.

Even older workers downplay their risk of suffering a disability that would cause them to miss work for an extended period of time. According to surveys by the Council for Disability Awareness and America’s Health Insurance Plans (AHIP), 47 percent of Baby Boomers admit they are not too concerned about their chances of suffering a disabling illness or injury.

One of the reasons employees misjudge the risk is because they mistakenly believe that injuries cause more disabilities than illnesses do, AHIP says. Not so. Research shows that the most common causes of disability are illnesses, such as cancer, heart disease and diabetes. Most workers say that if they were out of work for a year, they could rely on a patchwork of income sources to make ends meet, including help from friends and family, retirement savings accounts, home equity loans and credit cards.

Disabilities: Myths and Realities

Here are the top misperceptions employees have about disability income insurance, according to The Council for Disability Awareness:

• It’s not going to happen to me. A disabling accident occurs every two seconds in the United States, yet nine out of 10 workers dramatically underestimate their chances of becoming disabled. The odds are three in 10 that a worker entering the workforce today will become disabled some time before retiring.
  
  
• If I do become disabled, it won’t last long. Eighty-five percent of workers surveyed express little or no concern that they may suffer a disability over three months long. While it’s true many disabilities last only a few months, the average disability actually lasts 2.5 years.
  
  
• My employer covers disabilities. Most employers, particularly larger companies, provide some form of sick pay and short-term disability benefits to employees. That’s not necessarily the case among small employers. More employers offer voluntary disability insurance at the workplace, but some employees don’t opt to buy the coverage. Also, many employees mistakenly think their medical insurance covers lost wages, but it doesn’t.
  
  
• I don’t need disability insurance because I have workers’ compensation. More than 90 percent of disabling accidents and illnesses are not work-related and not covered by workers’ compensation.

Double Trouble

These misconceptions can harm both your employees and your company. Because so many workers don’t appreciate the risk of disability, many voluntary insurance programs suffer from a phenomenon known as “adverse selection.” Healthy employees are less likely to purchase coverage if it is voluntary, resulting in higher premiums for participants, if the group doesn’t meet participation requirements. For the health of both your employees and your company’s bottom line, here are a few things you can do to encourage enrollment in disability income insurance programs:

• Promote disability coverage at your workplace. Mention available coverage in newsletters, benefits websites and emails whenever you talk about benefits.
  
  
• Help dispel the rumors by providing accurate information about the risk of disability.
  
  
• Review the relationship between long-term disability insurance to other employee benefits. Disability plans are just one piece of your employee benefit package, often overlapping with sick pay, retirement, workers’ compensation and other programs. Consider revising portions of the disability plan for better integration with your benefits package.
  
  
• Create a system for obtaining ongoing reports that will help you identify disability trends in your workplace.
  
  
• Compare your plans with those of similar employers. Address areas where your plan is either unusually restrictive by improving coverage or offering voluntary programs.

For more information on long-term disability policies, please contact us. 

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In this issue:

This Just In...

Why Your Employees Need Long-Term Disability Benefits

Voluntary Life = Better Benefits — at No Cost

Enhance Your Benefit Plan with Cancer Insurance

Parts of a Long-Term Disability Policy

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