Why Have Disability Insurance?
Without a paycheck, 7 in 10 working Americans say they could not make it a month before financial difficulties would set in, and 1 in 4 would have problems immediately, according to a Life Happens survey.
How Do You Guard Against This Event?
Think of disability income insurance as "insurance for your paycheck. It ensures that if you are unable to work because of illness or injury, you will continue to receive an income and make ends meet until you are able to return to work."
Here are some Eye-Popping Statistics concerning disability:
- You actually have a 3 in 10 chance of suffering a disability that keeps you out of work for 90 days or longer at some point during your working career. (Keep in mind, 90% of disabilities are caused by illnesses and not accidents.)
- A 25-year-old worker who makes $50,000 a year and suffers a permanent disability could lose $3.8 million in future earnings.
- At least 51 million working adults in the U.S. are without disability insurance other than the basic coverage available through Social Security.
- Only 40% of U.S. households have at least $6,275 in liquid savings. That is what it would take a family of four to replace income at the poverty level for 3 months.
- Four out of ten American adults indicate they cannot pay an unexpected $400 bill without having to carry a balance on their credit card or borrow money from friends, family, or the bank.
- A study of consumer bankruptcy filings from 2013 to 2016 found that 77.8% of debtors cited income loss as a contributor to their bankruptcy. This included 44.3% specifically citing medically related work loss as a contributor.
- Each year around 5% of working Americans will experience a short-term disability (6 months or less) due to illness, injury, or pregnancy. Almost all of these are non-occupational in origin.
Disability Insurance - Defined
Disability Insurance, often called DI or disability income insurance, or income protection, is a form of insurance that insures the beneficiary's earned income against the risk that a disability creates a barrier for a worker to complete the core functions of their work.
For example, the worker may suffer from an inability to maintain composure in the case of psychological disorders or an injury, illness or condition that causes physical impairment or incapacity to work. It encompasses paid sick leave, short-term disability benefits, and long-term disability benefits.
Statistics show that in the U.S., a disabling accident occurs on average, once every second. In fact, nearly 18.5% of Americans are currently living with a disability, and 1 out of every 4 persons in the U.S. workforce will suffer a disabling injury before retirement.
The Truth
The problem is that most workers do not carry long-term disability insurance, because they believe it is only applicable for those in the high-risk industries. A firefighter might need that protection, but would an office administrator or a graphic designer?
Sadly, everyone needs this type of protection, and too few actually have it. Why? Illnesses, not accidents, account for up to 90% of disabilities that prevent people from working. That includes conditions like:
- Cancer
- Hypertension
- Heart Disease
- Diabetes
- Stroke
Those are only the smallest fraction of potential threats to your family's financial stability. There are many others, ranging from autoimmune diseases to chronic health conditions stemming from lifestyle choices. Ramifications from eating the wrong foods, from smoking, or from recreational drinking can have profound repercussions on your ability to earn an income and provide for your family.
Do Not Count On Workers Compensation
Another reason that many people forego buying their own personal long-term disability insurance, is they believe there will be coverage for them under Workers Compensation. That is why employers are required to carry Workers Compensation, right? That is true, but remember that Worker's Compensation only applies to injuries or illnesses sustained on the job or while carrying out job-related duties.
For instance, if you slipped and fell in the office and broke your ankle, then Worker's Compensation might cover your time out of work. However, what if the same accident occurred in your own kitchen? What if your illness had nothing to do with your work environment?
In reality, Worker's Compensation is usually not applicable. According to statistics from the U.S. National Safety Council, 73% of long-term disabilities are the result of an accident or illness that had nothing to do with the workplace or the workplace environment. That means in almost 75% of cases, Workers Compensation does not pay out.
You Probably Do Not Have State Provided Short-Term Disability Coverage
Perhaps you think that your state government will provide you with financial protection if you were to suffer an accident or illness not covered by Worker's Compensation. That's a natural assumption, but it is probably incorrect.
Only a handful of states in the country -- California, Hawaii, New Jersey, New York, Rhode Island and Puerto Rico -- offer any sort of short-term disability insurance. In those states, you may have coverage for up to 6 months. However, it is not free. Workers have to pay for that protection through payroll deductions. If you live outside of those states, you have no state-provided disability Insurance protection.
Do Not Plan On Social Security Disability Insurance
If you live outside the few states that offer short-term disability insurance, and you cannot qualify for Worker's Compensation, then you might believe that Social Security Disability Insurance (SSDI) is the answer. This is a federal government provided disability program that is designed to provide protection for most workers. The problem is that qualifying for SSDI is no simple matter.
The Social Security Administration itself points out that 65% of applications for disability insurance coverage are denied initially. Even for those who are approved, the average monthly payout is just $1,130. That's hardly enough to cover most household expenses.
Your Employer May Not Offer Long-Term Disability Insurance
For those who are denied access to Social Security Disability Insurance, have no case for Worker's Compensation, and lack a state-provided disability insurance plan, it might seem like your employer would be able to help. Sadly, that is rarely the case. In fact, according to information from the U.S. Department of Labor, over 70% employers in the country offer no long-term disability insurance options at all. Short-term disability insurance often does not provide enough to meet your financial obligations if you are ill or injured and unable to work for an extended period of time.
In most instances, you will find 2 types of employer-provided disability insurance in place today.
- The most common is short-term disability coverage. This insurance will replace a good portion of your income, but not all, for about 3 months.
- The least common is long-term disability coverage. This usually covers between 40% to 60% of your income, and will last longer than 3 months, although the exact duration varies.
Your employer may give you the ability to improve the coverage offered by adding to the baseline protection out of your own pocket. However, it is up to you to make that decision. Some companies offer no disability insurance at all, but give you the option to purchase on your own at full cost.
You will find that buying disability insurance through your employer can come with a few benefits:
- It is often easier to qualify for disability insurance protection, versus going out to purchase on your own. For that reason, it is a good idea to check with your employers' Human Resources department to learn about options for disability insurance coverage.
Is Disability Insurance Essential For You?
Do you and your family rely on your income to meet your financial obligations? Would a disruption in that income result in serious financial problems and stress? If so, then disability 
insurance is certainly an important consideration.
For most families, it takes only about 30 days for the ramifications of a disabling illness or injury to start causing problems. By this point, you will have spent what money you had on hand, and may be facing the prospect of dipping into your savings to meet your financial obligations. You might not even have an y substantial savings to dip into in the first place.
What Will You Do Without Ongoing Income?
Remember that even if you do not have a risky occupation, there is still a significant chance that you will become disabled for at least 90 days before you reach the age of retirement. Also, remember that 90% of disabilities have nothing to do with accident-related injuries and everything to do with illnesses.
Regular income is the only thing keeping your family afloat financially. It is the only thing allowing you to make your mortgage payments or rent, to buy groceries, to make your car payment, and to meet the needs of your children. How will you maintain your standard of living if you are unable to earn that income?
What Is The Next Step?
Obtaining disability insurance quotes is the first step toward achieving the protection and peace of mind that you need and deserve.
Our team with Consultative Insurance Group, Inc. is ready to help! Our knowledgeable team is ready to consult with you to learn your specific needs and tailor a disability insurance plan to meet your needs and your budget. Click Our Team, schedule an appointment at one of our office locations, or give us a call to learn more!
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Consultative Insurance Group, Inc.
Corporate Office: 25800 North Depot Street, Ste 200, Olmsted Falls, OH 44138 (440) 234-0305 or (440) 235-1442
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