According to a LIMRA 2016 Fact Sheet for Disability Awareness Month, “[a] majority of consumers worry about facing a disability but only one third have disability insurance.”
No one likes to buy insurance. Nor do we want to dwell on the reasons we might need disability insurance someday. But it can literally be a life saver, so it is important to dispel the reasons why you shouldn’t.
No, I Won’t Need Disability Insurance
The truth is, the chances of needing disability insurance are not as slim as people think. We call this the disability disconnect.
This disconnect is real, and it’s one of the top reasons people reference when debating disability insurance. The likelihood they will need it is low.
First, even if the claim is true, this isn’t really the point of insurance. The chances of something happening aren’t why you get it.
Second, if your chances of needing it are high, insurance becomes that much harder to qualify for.
Third, what number makes disability insurance make sense?
Disability insurance is like any other form of insurance. You don’t want to need it. Hopefully you don’t need it. But you’re glad to have it when you do.
“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.”— 5 Myths About Disability Insurance
But I Have Workers’ Compensation…
Yes, if your employer offers Worker’s Compensation there is coverage available, but only if you are injured in the workplace and, in many cases, during the course of work you are supposed to be doing.
Based on the numbers, the chances of becoming disabled at work are lower than outside of work. In fact, “approximately 90% of disabilities are caused by illnesses rather than accidents.”
Beyond that, many workers who are injured on the job increasingly find that Worker’s Compensation comes up short.
A ProPublica and NPR exploration of Workers’ Compensation reforms, called The Demolition of Workers’ Comp, dug into how many workers are finding themselves saddled with debt as they lose their income due to an on-the-job disability.
“Over the past decade, state after state has been dismantling America’s workers’ comp system with disastrous consequences for many of the hundreds of thousands of people who suffer serious injuries at work each year,”—they reported.
You can’t count on worker’s comp alone to protect your income.
What about Social Security Coverage?
The definition of disability under Social Security is different than other programs. Social Security pays only for total disability. No benefits are payable for partial disability or for short-term disability.
“Disability” under Social Security is based on your inability to work. We consider you disabled under Social Security rules if:
You cannot do work that you did before;
We decide that you cannot adjust to other work because of your medical condition(s); and
Your disability has lasted or is expected to last for at least one year or to result in death.—(SSA.gov)
There are several other requirements, as well—and if you qualify for Social Security disability benefits, the process of approval can be very long. Even then, Social Security benefits are limited (you can calculate estimated Social Security benefits here).
I Am Not at Risk of Disability
As noted earlier, most disability claims are not the result of workplace injuries or an extreme lifestyle.
The majority of disability claims are caused by illnesses. Illnesses such as arthritis, cancer, cardiovascular disease, mental disorders, and nervous system illnesses such as Alzheimer’s and Parkinson’s disease.
No one thinks it will happen to them, and we’re surprised and dismayed when it happens to someone we know, but getting sick is something we all face. This is why disability insurance exists.
I Can Afford to Get By Without My Income
While many feel they can “get by” in an emergency, the numbers suggest otherwise.
Over half of the American population has less than one month’s income put aside for emergencies (from CFED “Treading Water in the Deep End”, January 2014). According to the Federal Reserve Board, around 40% of Americans are not able to meet an unexpected expense of $400.
Fortunately, you can financially prepare for the possibility of disability. But the first step is realizing there’s no good excuse for not seeking out disability insurance.
Find out if your employer offers disability insurance, and if they don’t, seek the help of a CDA member company; it could buy you some real peace of mind.