The need for Disability insurance is all too often underestimated. Although most people wouldn’t dare forgo necessary evils such as Homeowners insurance, insuring a new car, or even obtaining Life insurance, the need for Disability insurance is far too often underestimated. Underestimating the value of insuring earning power, especially considering the rate of personal savings in the U.S. is at an almost unprecedented low, could spell disaster if a disabling event was to occur.
Disability Insurance from a Worker’s Perspective. If you’re one of those who think you don’t need to purchase Disability insurance because you figure it’s unlikely you’ll ever become disabled, prepare yourself for some alarming statistics. According to government studies, younger individuals have a one-in-three chance of suffering a disabling event before they reach 65-years-old. Older individuals have a one-in-six chance of the same fate.
Others might be counting on alternative sources of income, such as Social Security Disability Benefits, to replace their income if they become disabled. Although this benefit is available after a disabling event, it comes with many rules and regulations. For example, the SSA will consider your ability to perform any type of work, not just whatever your previous line of work was prior to the disabling event, as they are determining your eligibility for benefits.
Furthermore, Social Security Disability Benefits are only available to someone that’s totally disabled and that has a disability expected to result in death or last longer than one year. Those suffering a short-term or partial disability don’t qualify. The SSA has a very strict definition of disability and assumes that working individuals who become unable to work temporarily will have access to alternative sources of income to support themselves until they return to work.
As mentioned above, alternative sources of income such as personal savings are at all-time lows. In fact, data from the U.S. Bureau of Economic Analysis shows that personal saving rates have been in the red for several years now, with lows of -1.6. This essentially means that many individuals are living paycheck-to-paycheck or spending more than they earn and simply don’t have emergency savings to carry them through their period of disability.
Now that we’ve established why workers need Disability insurance, you might be curious how you can purchase it. Most individuals generally find purchasing their Disability insurance through their employer to be the most cost-effective and simple source.
Disability Insurance from an Employer’s Perspective. Offering Disability insurance in the workplace makes good business sense for employers; after all, employees are one of your business’s most valuable assets. Employers can offer Disability insurance on a voluntary basis, which allows employees who desire the coverage to elect it and pay the entire premium themselves, or provide a base amount and give employees the option to pay for supplemental coverage on their own. Supplemental or voluntary, either option allows employees to pay the premiums conveniently through payroll deductions and allows them to benefit from reduced group rates.
Since lost work time from injury or illness has a substantial cost to employers, plans that include return-to-work and rehabilitation services might be a strong consideration when selecting a plan. Other attractive features to consider are the proactive management of disabilities through regular early contact with both the disabled employee and his/her physician; a reduced benefit for disabled workers able to return to work on a part-time basis; and working with the employee, employee’s physician, and employer to find creative and flexible ways to get the employee back to work.
Disability insurance plans have long been a highly-valued and appreciated benefit offering, but in today’s economy, such offerings are more important than ever to employees and employers