Forty-two out of 100 American Speech-Language-Hearing Association (ASHA) staff are worried enough about protecting their families to buy life insurance, but only 25 in 100 had individual disability insurance. These life insurance vs disability insurance coverage choices don’t reflect the actual risk.
As a result, we undertook an initiative to offer supplemental disability (aka individual disability income) insurance to all our staff who had not taken it when they first came aboard. Now 53 out of 100 have individual disability income insurance. This initiative more than doubled the number of people with coverage.
Death vs Disability
People are far more likely to become disabled during their working years than to die. You hear all kinds of numbers thrown around. I looked at disability and death probability tables published by the Social Security Administration (SSA) for insured workers born in 1996. Death is pretty indisputable, but disability is more subjective. The SSA standard of disability is high, so this gives us a conservative estimate of disability.
- Males born in 1996 (so they attained the age of 20 in 2016) have a 26.3 percent probability of disability before age 65, and a 7.2 percent probability of death.
- Females born in 1996 (so they attained the age of 20 2016) have a 24.8 percent probability of disability before age 65, and a 3.6 percent probability of death.
You can calculate your own likelihood of disability using The Council for Disability Awareness “What’s your Personal Disability Quotient” calculator.
What if Misfortune Strikes?
When it comes to life insurance vs disability insurance, why are we far less likely to protect ourselves against the more likely event?
Most of us cannot afford to live without a paycheck. Medical problems contribute to 62 percent of all personal bankruptcies filed in the U.S., and half of all home foreclosures. We’re lucky that ASHA covers 60 percent of our income for us, but the extra 15 percent we can purchase could make a huge difference if misfortune strikes.
It is easy to assume our colleagues haven’t made a fully informed decision and worked with UNUM to offer supplemental disability (aka individual disability income) insurance to all our staff that had not taken it at the time they were hired. This was not easy. It took two years of hounding UNUM using every angle and connection I could muster to get them to agree. (A special thanks to Zack Pace at CBIZ and Carol Harnett at the Council for Disability Awareness for their help.)
I met with the 205 people we extended the offer to and explained how they get paid if they can’t work. I drew a timeline from that date to their 65th birthday and walked them through how family and medical leave, sick leave, annual leave, short and long term disability coverage work. Ninety-two accepted the offer of coverage. Here’s some of what we discussed.
Life Insurance vs. Disability Insurance: Questions to Ask
Can you live the way you want to live on 60 percent of your current salary? If the answer to this question is “yes”, you don’t need additional disability coverage. If the answer is “no”, keep reading. Our group policy insures 60 percent of our income. If you choose to purchase supplemental coverage, it raises your benefit to 75 percent of your salary.
Just over one in four of today’s 20-year-olds will become disabled before they retire.
What are the Most Common Causes of Disability?
If you’re healthy, you probably think of accidents first, but they’re not usually the cause of disability. Illnesses like cancer, heart attack, or diabetes cause the majority of long-term disabilities. Musculoskeletal disorders like back pain, arthritis, spine/joint disorders, and fibromyositis are also significant causes.
For example, happier circumstances can also lead to disability if a woman is placed on an extended period of bed rest when pregnant.
How Long Does the Average Period of Disability Last?
The average group, long-term disability claim, lasts 34.6 months, so about three years. One in eight workers will be disabled for five years or more during their working careers.
How Many Years Do You Plan to Continue Working?
In thinking about the value of disability coverage, your age matters because the typical benefit period is until age 65. That means you’ll receive disability payments from the time you become disabled until you reach the age of 65. If you’re between 65 and 75 when you become disabled, the maximum benefit period is 24 months. If you’re over the age of 75, the plan only pays you for 12 months. Once you reach retirement age, disability coverage may not be a good value. You might want to consider additional long-term care coverage instead.
It goes to show people need help to make a fully informed decision when it comes to choosing between life insurance vs disability insurance. The role of disability coverage in protecting income is not well understood.
We’ve changed our onboarding process here at ASHA. I now meet with every new hire to explain this coverage in particular. Then we make sure we get a decision from everyone so they haven’t set aside the information and forgotten about it. With any luck, no one will ever need it, but I’ll sleep better knowing everyone who wants the coverage has it.
A version of this article originally appeared in Inside Workplace Wellness.