Importance of Disability Insurance

I have been in the human resources field for over 25 years and I have learned one thing...you cannot plan for everything. One of those things you cannot plan for is an accident or injury. And, unfortunately, we do have accidents, myself included.

After multiple surgeries on my leg and ankle resulting from a break that went wrong, I realized I am human. I also realized I needed disability insurance for myself and my staff, because during my career I have seen many employees diagnosed with conditions which will physically restrict them from performing their duties.

While I am not an insurance agent, I can tell you that I believe disability insurance is very important protection for both parties in an employment relationship. First, employers should offer disability insurance to protect their employees when that inevitable accident occurs. Second, if the employer offers disability insurance, the employees should take advantage of it for the very same reason.

I found an article online that emphasizes statistically why we need to have disability insurance. Below is the article reprinted. I hope you enjoy it.

5 Myths About Disability Insurance

Shortly after putting out the group's first pamphlet on how disability insurance can protect your family, Stephen Brobeck, executive director of the Consumer Federation of America, started offering it as a benefit to his employees. "That work [15 years ago] made me aware that I was being an irresponsible employer because we weren't offering disability insurance," he says, adding, "We feel pretty strongly that this is an important type of program."

Brobeck is still trying to get the message out to other employers, and to employees, many of whom don't even know whether or not they're offered this benefit at work. Add it to your checklist for this fall's open enrollment season when you sort through the benefits you'll sign up for for next calendar year.

This week the Consumer Federation of America and Unum, the leading long-term disability insurance player by market share (16.2%), released a report based on interviews with 407 individuals who put in claims based on their employer group policies through Unum and have been on long-term disability for at least six months-or used to be. "The beneficiaries told us that disability insurance payments played an essential role in protecting their financial and emotional lives," Brobeck says.

Long-term disability payments don't replace your salary; they provide a buffer-usually 60% of your salary. That means that most recipients have to adjust their lifestyles and priorities: of those interviewed for the report, 85% cut back or completely stopped saving for retirement, and 58% skipped or delayed some medical, dental or vision care for themselves or family members.

Here are five myths about disability insurance the report debunks:

I doubt I'll ever need it. The Social Security Administration estimates that one in four 20-year-olds will become disabled and unable to work before they reach the age of 67. In 2012, more than 650,000 disabled workers received more than $9 billion in long-term disability benefits through employer-sponsored group disability coverage.

Worker's compensation will cover me. Worker's comp replaces lost income if an injury or illness occurs on the job, but fewer than 5% of disabling accidents and illnesses are work-related. Most (90%) of long-term disability claims are for illnesses, not accidents. Vicki Burhenn, a Unum long-term disability recipient, from Lawrence, Indiana, went on disability in 2010 when her chronic obstructive pulmonary disease progressed so that she could no longer work as an office administrator at a mental health facility. "Emotionally, going on disability insurance was a Godsend, knowing I had the money coming in; it's like going from drowning to taking a deep breath," she says.

It's a man's problem. 60% of the Unum long-term disability recipients over the 2009-2012 time period were women.

I'm too young to worry about it. 41% of Unum long-term disability recipients over the 2009-2012 time period were younger than 50, with a third of those under 40. Dawn-Michelle Wyzard, a single mom in her 30s, from Clarksville, Indiana, counted on two rounds of disability payments when she had back surgery and needed time off from her job as a healthcare data processing administrator. "There is no way I could have survived the surgery financially without disability benefits," she says, adding, "It helped me to not be stressed because I knew the money would be there."

I can get coverage on my own. Individual disability insurance, sold through financial advisors, is considerably more expensive than employer-sponsored coverage. Yet only a third of private industry workers have access to employer-sponsored coverage, according to the Bureau of Labor Statistics. Some employers pay 100% of the premiums; some share the cost with employees; and some offer it as a voluntary employee benefit, requiring the employee to pay 100% of the premium. Before you go on the individual market to try to buy a better policy, check if your employer gives you the option to "buy up" and add additional coverage.

For a policy comparison checklist from the Consumer Federation of America pamphlet, click here. (Note: Unum paid CFA $40,000 for their work in putting together the report; the recipients who were interviewed got $25 stipends.)

Source: Forbes/Investing

"5 Myths About Disability Insurance"

Sep 24, 2013

By Ashlea Ebeling, Forbes Staff

http://www.forbes.com/sites/ashleaebeling/2013/09/24/5-myths-about-disability-insurance/

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