The Hidden Value of Social Security Disability Insurance: Why It’s Important During Benefits Enrollment
Editor’s Note:
Would you like to place a hefty bet against your most of your savings and financial security? Unfortunately, there’s a good chance you made the wager already.
One of the largest financial gambles in America takes place every day for millions of working people. It’s a gamble that’s easy to overlook, but one that can quickly erase someone’s financial resources.
The gamble is deceptively simple: it’s failing to have one of the most basic kinds of insurance that every working American should have: Disability Insurance. Disability insurance? Yes, disability insurance is income protection. It pays you a portion of your salary when you need to miss work due to an illness, injury, or having a baby. If you don’t have income insurance in place, it can lead to lost wages for months or years.
Doesn’t Everyone Have Disability Insurance?
No.
Today, approximately 51-million working Americans have no form of income protection. That’s around one-third of the labor force. And if you’re just starting out in the workforce you have a one-in-four chance of becoming disabled before you reach normal retirement age.
Unlike worker’s compensation coverage (which businesses are required to provide to provide to employees and only covers accidents that happen at work), disability insurance offered through the workplace is an optional employee benefit.
About 40 percent of companies pay for their employees’ short-term disability insurance and 35 percent cover all or most of the premiums for long-term disability insurance. (Click here for more information. Look for Table 17.)
A growing number of employers are offering disability coverage on a voluntary basis. Employees can sign up for disability insurance and they pay all the premiums, but it’s usually at an attractive group rate – and with the advantage of payroll deduction for premiums. Because they pick up the tab for premiums, if they do wind up collecting benefits at some point, they’ll receive those benefits on a tax-free basis.
Voluntary disability coverage is similar to dental insurance in that employees can choose the coverage – or not. Because employees don’t always understand the purpose of disability insurance, they opt out. (Click here to learn more about disability insurance.)
You, disabled? What are the odds?
This is where a gambler’s wager gets serious. The odds of becoming disabled during your working life are higher than people realize. The facts are hard to ignore:
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- More than 1 in 4 of today’s 20-year-olds will experience a disability before retirement age.
- Accidents are NOT the cause of most disabilities. Back injuries, cancer, heart disease and other illnesses cause the majority of long-term absences.
- Each year, five percent of ALL working Americans will experience a short-term disability (six months or less) due to illness, injury, or pregnancy. Almost all of these are non-occupational in origin.
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Don’t Bet the House
Today, the leading cause of home foreclosures and even bankruptcy is unexpected medical expenses. Only 40 percent of U.S. households have enough liquid savings to cover approximately three-months of their recurring expenses. Three out of 10 adults say they couldn’t pay an unexpected $400 bill without using a credit card or borrowing money from friends, family, or the bank.
If you’re not sure if you have disability insurance, you need to find out. Ask your employer.
If you need coverage and your employer doesn’t provide it (or doesn’t offer enough coverage), there’s good news. The non-profit organization, The Council for Disability Awareness, can help with easy-to-understand information.
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