Survey reveals Baby Boomers’ need for strategic retirement planning

A report recently released by BMOW Wealth Management showed aging Americans have concerns with regard to retirement planning and the effects on their family and wealth.

The report, called The Aging Economy: Improving with Age, surveyed more than 500 Americans 55 and older and reviewed the benefits of an in-depth wealth plan to help manage the stressors many seniors feel throughout retirement.

“While Americans are fortunate to be living longer, extended retirement brings additional costs and challenges,” said Tania Slade, National Head of Wealth Planning, BMO Wealth Management (U.S.).

“It’s crucial that people approaching retirement work closely with financial planners, spouses, and family members to come up with a viable, long-term strategy that supports them throughout their elder years and enables them to leave the legacy they desire.”

As a result of the increased life expectancy among Americans, the average retirement period is now 18 years, and many boomers are remaining in the workforce longer to grow their retirement next egg, meet retirement and estate planning goals and stay active. In addition, more Boomers are thinking now more than ever about how they will live comfortably in the future.

According to the survey, Boomer’s top concerns about a prolonged retirement include quality of life and healthcare costs, followed by being a burden on family members and running out of money during retirement.

Additionally, spouses and partners can have differing opinions about their long-term financial goals. The biggest discrepancy most couples noted was when and how much to save for the future, followed by retirement goals and how personal assets and possessions should be distributed to heirs.

Lastly, respondents identified their most significant investment and retirement issues as a desire to maximize retirement income, fear of outliving their savings in retirement, and the impact of long-term care costs on personal finances.

 

 

 




SSDI lacks rehabilitation resources

By Ted Norwood, General Counsel & Director of Representation, Integrated Benefits Inc.

SSDI has poor resources for vocational rehabilitation or job placement, and no resources at all for claimants during the wait for a decision. This makes it harder for people to recover and get back to work.

Because of the long wait, many claimants miss out on vital windows to improve their chances of recovery and return to work. By the time the SSA awards disability payments, many claims are permanent due to the effects of such a long layoff and the lack of rehabilitation resources.

Certainly, SSDI can provide income to your disabled employees, but relying on it leaves them with a long wait and long odds, making it less likely they will be able to rejoin your team or find alternative work.

SSDI is not all bad news for employers

Although SSDI does not do much for employers on its own, it is certainly better than nothing. It does eventually provide Medicare and annual cost of living adjustments (COLAs) for disabled claimants.

Those are important benefits, as many employees lose their health insurance during the wait for SSDI. Annual COLAs help people with disabilities keep up with the economy. Every bit matters once workers are on a fixed income.

Despite its problems, the SSDI program is a successful program designed to help protect American workers. Still, there is one more major advantage SSDI provides to employers.

SSDI acts like a subsidy to group long-term disability insurance, making disability policies affordable and an excellent value.

Group long-term disability policies protect employees from the disadvantages of SSDI.[1]

  • These LTD policies usually start with an own-occupation period of two years, allowing the employee to receive benefits immediately.
  • Group LTD policies can be structured to pay higher benefits than SSDI does.
  • Group LTD policies have better opportunities to provide vocational rehabilitation and return to work services.
  • Plus, most insurers will provide a lawyer for claimants to assist with their SSDI applications.

Although claimants often cannot double dip LTD and SSDI, SSDI still provides them with health insurance and cost-of-living adjustments. These benefits are the real opportunity SSDI provides for employers.

[1] https://www.consumerslife.com/EmployersCLIC/Products-for-Employers/Group-Long-Term-Disability-Insurance.aspx ; https://www.policygenius.com/disability-insurance/learn/long-term-disability-insurance-faqs/




Do your benefit priorities match your employers’?

By Diane Russell, Lincoln Financial

Your company’s benefit package is sending you a message about their priorities — and whether they are the same as yours. When companies get it right, it pays off in terms of your job satisfaction and desire to continue to work there. That’s because your employer is making it clear they are listening — and responding — to what you and your colleagues are saying you want and need the most.

What employees are concerned about

How can you effectively prioritize the value of your various benefits? The first step is to consider your own financial needs and goals, as well as your stage of life. Do you have a family? Are you their main source of income? Are you prepared if an illness or injury keeps you out of work for a period of time? When do you plan to retire?

In addition to your own specific needs, also consider the overall issues faced by today’s employees and how those issues may affect your benefit choices and work performance. We live in a time when financial stress is increasing, and health care is a significant contributor to that stress. In fact, 46 percent of employees fear unforeseen health expenses more than any other concern.1 And that financial stress can impact employees’ health care decisions: In a 2016 study, nearly 80 percent of emergency room physicians reported treating patients who have health insurance but nevertheless chose to delay or even forgo medical care due to costs.2 When employees do decide to seek the medical care they need, many may have to make difficult decisions about where that money will come from.

One notable trend shows that many Americans are funding everyday expenses by dipping into their retirement savings. In fact, 44 percent of workers surveyed said they’d most likely use money from their retirement accounts for expenses other than retirement, with 30 percent having already made one such withdrawal. 3 The top reason workers withdraw money from their retirement account is out-of-pocket medical expenses, with 28 percent of those surveyed withdrawing money for that reason. 4

 Not surprisingly, 42 percent of American workers are concerned about running out of money in retirement.5

Benefits make a difference

Employee benefits can help relieve financial stress. They are an important part of your total compensation package and can significantly influence the decision to stay at your current job or seek a new position.

Benefits attract6

57 percent of job candidates report benefits and perks are among their top considerations before accepting a job.

Benefits retain7

Nearly 80 percent of workers would prefer new or additional benefits to a pay increase.

What employees value

What benefits do your colleagues value and prioritize when it comes to choosing or staying with an employer? A recent Glassdoor Economic Research employee study shows there’s a clearly defined hierarchy. The study ranked 54 benefits by how much correlation they had with overall satisfaction with benefit packages — and the core benefits of health insurance, paid leave and retirement (including pensions and 401K plans) were all in the top five. These benefits, along with disability coverage, are the ones that can really make a difference to your financial security and future.

That’s because health benefits can be a prime protection against financial pitfalls such as high deductibles and coinsurance, as well as the loss of income that often comes with a prolonged recovery. Employees agree that this kind of protection can strongly contribute to a feeling of financial control and well-being, and view health insurance (97 percent) and disability insurance (93 percent) as important sources of protection and security for their families. They not only value this coverage, they expect employers to offer it, with two out of three employees expecting employers to provide disability insurance.8

Interconnected benefit solutions

These three key benefit areas — health insurance, retirement, and disability — are interconnected. They serve as the legs of a three-legged stool when it comes to financial wellness. If one leg is taken away, or is inadequate, the whole stool may collapse.

As we’ve noted, many workers will turn to their retirement accounts to pay for out-of-pocket medical expenses. Another reason for withdrawals is when they are out of work for a prolonged period due to a serious illness or injury. Your most important financial resource, after all, is your ability to earn an income. If your health insurance or disability coverages are inadequate, and you need to take out a 401K loan to pay medical expenses, the impact won’t just be on today’s finances, but also your long-term financial outlook.

How can your employer help?

Employers need to reach out to their employees — and truly listen to and incorporate their responses when choosing the tactics and tools that will become part of their financial wellness offerings. They need to recognize the importance employees place on the three-legged stool of health insurance, retirement and disability, and provide you with the information you need to thoroughly weigh your benefit options and make informed decisions.

Optimally, this could include providing concrete examples of how everyday health occurrences can affect your current and future financial picture, and how the benefits you are offered can help you reach your financial goals. Here are some questions you might want to consider and talk to your employer about:

1. Are you signing up for the same benefits every year because they are the best options — or because it’s what you’re used to?

When it comes to benefits through work, 87 percent of employees say they are more likely to enroll in benefits they are familiar with and are educated about.9 Although that’s understandable, that may mean you could be missing out on valuable benefits. Be sure to look at your employer’s full range of benefit options — not just the ones you already know well.

2. Have you had a major change in your life that could affect your benefit needs?

This is another aspect of not just doing what you’re used to – if you’ve recently gotten married, divorced, had a baby, or gotten a significant raise, your benefit needs and beneficiaries may need another close look.

3. Health insurance may pay most of your medical bills, but can you also take advantage of other options that protect you against loss of income during an illness or injury? Although 51 percent of employees say they have a plan in place for their financial future, only 26 percent have insurance that will cover them in case they can’t work due to illness or injury.10 Remember, using your retirement savings is a short-term solution with long-term negative results.

4. What will your out-of-pocket costs be — co-pays, deductibles, higher costs for out-of-network providers?

It may not be possible to know exactly what your expenses will be, but consider the possibilities and investigate whether there are coverages such as accident and critical illness that offer cash payments to help fill in the gap.

5. Are you taking full advantage of your company’s retirement match program?

Many companies offer a percentage match up to a certain contribution amount. Don’t leave free money on the table — make sure you’re contributing, at the minimum, enough to get your full company match.

6. Is your company’s benefit program on par with other companies in your industry?

Don’t compare apples to oranges — not every industry offers the same level of benefits. It’s important to have a sense of what the is norm in your industry and if your company meets or even beats it.

Conclusion

The benefits companies provide and the efforts they make to assure their employees are fully informed about their choices offer a view into how much a company values its employees. Companies that are truly trying to attract and retain talented employees listen to what their employees are saying, and know the triumvirate of key benefit solutions — health insurance, retirement, and disability — can make a crucial difference.

Sources

1 Lincoln Financial Group, “2017 Financial Focus Study.”

2 Brooke Murphy, “96% of Patients Don’t Understand Their Emergency Insurance Coverage: 6 findings from the ACEP,” Becker’s Hospital Review, https://www.beckershospitalreview.com/payer-issues/96-of-patients-don-t-understand-their-emergency-insurance-coverage-6- findings-from-the-acep.html, May 9, 2016.

3 PwC, “Employee Financial Wellness Survey,” https://www.pwc.com/us/en/industries/private-company-services/library/financial-well-being-retirement-survey.html, October 2018.

4 Transamerica Center for Retirement Studies. 2015 16th Annual Transamerica Retirement Survey.

5 See footnote 3.

6 Harris Poll for Glassdoor, December, 2015.

7 Glassdoor Employment Confidence Survey, October 2015.

8 Lincoln Financial Group “2017 Employee Benefits Study.”

9 See footnote 8.

10 See footnote 8.

 

 




How disability insurance can be part of your paid leave and absence management strategy

By Marjory Robertson, AVP & Senior Counsel and Abigail O’Connell, Senior Counsel, Sun Life Financial

When employees need to step away from work — whether to welcome a new child, care for a family member, or another life event — protecting their jobs and benefits, understanding their rights, knowing whether their employers will pay part or all of their absences, and meeting paperwork deadlines and other obligations is often overwhelming. If they work for an employer without a consolidated absence approach, they also will be required to contact separate entities for different benefits and entitlements. Workers may be calling their HR team to file their Family & Medical Leave Act requests, and contacting their insurance carriers to file claims for short-term disability benefits.

Absence can also be overwhelming for employers

Legal requirements regarding leaves of absence (paid and unpaid) and workplace accommodations are changing at breathtaking speed. Employers’ human resources staff do not have the time, personnel, or expertise to ensure they are complying with the various requirements of the FMLA, the Americans with Disabilities Act, and the increasing variety of federal, state, and local paid and unpaid leave laws.

Further, the consequences of noncompliance for employers are very serious, ranging from government investigations by the Equal Employment Opportunity Commission or the Department of Labor to individual lawsuits by employees.

More employers are choosing to outsource their leave management to their disability provider. In fact, according to a 2017 leave management survey by the Disability Management Employers Coalition, 88 percent of employers who outsource their leave management do so with their disability insurers. They have expert legal and compliance personnel and systems who help employers ensure compliance with this myriad of changing leave and accommodation laws. Moreover, insurance companies want to partner with employers to evaluate and handle complex leave and accommodation issues and challenges. Their knowledge, skills, systems, and staff help employees receive the benefits they need quickly, and prevent FMLA and ADA abuse, including the challenging management of intermittent FMLA leave.

Using one vendor for absence and disability can simplify absence for employees and employers

To streamline the employee and employer experience, many companies select one vendor to administer paid and unpaid leave, absence, and disability benefits. A consolidated approach enables both employees and HR managers to contact one entity for information about their rights and obligations concerning multiple benefits and entitlements, like short-term disability, FMLA, and ADA/ADAAA accommodations.

In many situations, both the FMLA and the employer’s STD policy may cover an employee’s absence, enabling the disability carrier to make determinations based on a single employee claim form. Employers and managers receive consolidated reporting showing the status, dates, and timelines for employee absence to support workforce planning.

A vendor can promote company offerings in a targeted manner to drive usage

With one vendor, employers can incorporate and administer company paid (and unpaid) leave plans and programs alongside absence management programs and disability insurance. For example, the vendor may highlight an aspect of the employer’s employee assistance program based upon the employee’s particular absence reason, or remind the employee of a duty to report to his or her supervisor based on the employer’s usual and customary call-out requirements. More and more employers are offering paid paternal and/or family leaves. Insurers can administer these leaves along with the unpaid statutory leaves and also ensure that employer-sponsored paid leaves are coordinated with the increasing number of state paid family and medical leave laws.

Consolidated administration drives efficiency

Through their disability insurance provider, the employer may gain efficiency by setting up a single-file feed and vendor agreement. The employer’s staff may also become more efficient by outsourcing absence administration. Additionally, using an outside administrator limits risk of exposure to employee personal health information Employees will appreciate not having to provide sensitive medical information to their manager or HR. The provider can become a trusted partner to provide collaborative and consultative guidance on a range of complex compliance and administrative issues.

Help is available

Disability insurance carriers have decades of experience in managing absences, accommodations, and claims related to an employee’s own medical conditions, and for other leave reasons authorized by law or by an employer-sponsored leave plan.

Insurance carriers hire expert claims, vocational, and legal staff who can properly evaluate eligibility for leave and benefits, and administer the claims and accommodations in a seamless and integrated manner that best serves employers and employees alike.

Disability carriers offer client-friendly services, including timely processing of claims for leave and/or disability, integrated management of leave and disability claims, detailed reporting on leave and disability incidence rate, and timely and helpful communications with both the employer and affected employees.

Insurers have made – and will continue to make – substantial investments in legally-compliant claims and leave technology to meet evolving needs. They also maintain strict data privacy and cyber security standards.

Engage your disability provider for help with your absence and leave management policies. From providing support tools to navigating the nuances of leave protocols and maintaining compliance, your insurer can support you and your employees throughout their leave duration.

For more on paid leave and your paid leave strategy, tune into the CDA podcast, with Carol Harnett, Abigail O’Connell and Marjory Robertson.




Why do some insurance policies still use pre-existing conditions?

 

By Larry Alkire, Senior Vice President, Chief Marketing Officer, American Fidelity Assurance Company

When Congress passed the Affordable Care Act (also known as Obamacare), the term—”pre-existing conditions”—became a household word. The ACA prevented health insurance carriers from denying you coverage, charging you more money, or refusing to pay for essential health benefits for any condition you had before your insurance coverage started. It also prohibited health insurers from denying you coverage or raising your rates once you’re enrolled in a plan based only on the health claims you filed.

No doubt, the ACA was a game changer for health care coverage. The legislated ban on healthcare “pre-ex” limitations opened the possibility for many people to get immediate coverage that they previously could not.

Health insurance, particularly employer-provided healthcare plans, typically have a larger enrollment of healthy people when compared to other employee-paid insurance. This is because employer-provided health insurance covers most employees and the company pays a portion of the insurance premiums. With high participation levels, the likelihood of anti-selection (a higher concentration of unhealthy participants) is reduced significantly—especially when compared to supplemental and voluntary insurance products.

Although pre-existing condition limitations are considered to be a negative for consumers, employee-paid supplemental coverage has a unique structure that features complex consumer/carrier tradeoffs.

Voluntary benefits that are commonly purchased by employees at work can include disability, life, long-term care, critical illness, and cancer coverage. Depending upon the type of insurance you select, the plan may ask no health questions when you apply (guarantee issue—typically for new hires and during open enrollment periods), limited health questions (sometimes referred to as simplified or express issue coverage), or a lot of health questions (full underwriting sometimes accompanied with verification).

The trend over the last few years is for applications for voluntary insurance to require less underwriting. However, with less underwriting comes a greater need for carriers to use pre-existing condition limitations. But is that a bad thing?

Actually, there’s a benefit to most consumers when insurers use pre-existing condition limitations. The “pre-ex” limitation allows carriers, particularly group insurance carriers, to bring insurance plans to many employers and their employees. It allows people to obtain coverage (on a guaranteed issue basis in many cases) by limiting insurance during the first year or two after they initially make the purchase to conditions that didn’t exist at the time of application, or people weren’t actively being treated for. This is usually true, even if you have serious pre-existing conditions.

Consider the alternative. Not having a “pre-ex” limitation could force insurance carriers to screen out people at a much more intensive level. Having less people in the plan makes the premiums more expensive.

Consider the following points when you’re thinking about “pre-ex:”

  1. Applicants usually know they have a condition that an insurance carrier would say makes them “uninsurable.”
  2. It is best to identify whether or not you have a pre-existing condition before you apply for insurance coverage. If you have a pre-ex condition, open enrollment is a golden opportunity to obtain coverage. You will not be covered for your pre-existing condition for the first year or two, but you will be for anything else that happens to you. (Keep in mind that you could be covered for your pre-ex condition one you are treatment-free for that condition for one to two years.)
  3. New applicants should always understand how the coverage works—and ask questions—before they buy it, and review their policy certificate again when they receive it.

The bottom line is that a pre-existing condition limitation often allows consumers with health issues to still buy supplemental and voluntary insurance. The limitation only applies to your specific condition and not all other conditions or injuries. And an open-enrollment-eligible plan is a great opportunity for an employee to take care of the needs they and their families have—even if they have serious health issues.




Study shows LGBTQ Americans in need of retirement strategy guidance

A recent study from Massachusetts Mutual Life Insurance Co. (MassMutual) revealed lesbian, gay, bisexual, transgender, queer or questioning (LGBTQ) Americans say they want to preserve their retirement savings but tend to take bigger risks when it comes to investing.

Forty-two percent of LGBTQ retirees and pre-retirees said the should become more conservative with their money as they come closer to retirement, as opposed to 28 percent who said they prefer a more aggressive investment approach.

However, 65 percent of those respondents say their investment strategy is actually more mixed, rather than conservative, compared to 52 percent of the general population — 31 percent of respondents admitted they could be taking more risks than they should be, compared to 22 percent of other retirees and pre-retirees.

“MassMutual’s study shows that many LGBTQ retirees and pre-retirees may benefit from consulting a financial advisor about their retirement investment goals, something less than half currently do, and may benefit from help leading into retirement and securing their finances through retirement,” said Catherine Cannon, Head of Personal Markets at MassMutual.

“Of those respondents in our study who do work with a financial advisor, six in 10 say their advisor has encouraged them to change their investment mix and 87 percent of those folks were advised to become more conservative as they enter retirement.”

Both the general population and LGBTQ retirees expect their retirement savings to last 25 years, however overall, LGBTQ retirees plan to retire later than the general population. In addition, the same respondents said they expect their retirement income will last as long as they need, which is two years fewer than the general population.

LGBTQ retirees also expressed more confidence than the general population that they will be financially prepared for retirement. However, despite this confidence, stock market volatility and downturn in the stick market are worrisome for the community as they approach retirement. About 75 percent of respondents expressed this concern, with 27 percent say they are “very concerned.”

72 percent of the general population expressed concern with regard to market volatility, while 21 percent said they are “very concerned.”

According to the study, LGBTQ respondents show greater comfort in taking investment risk, with just 20 percent willing to accept “below average” or “low investment returns” in exchange for greater safety. Overall, respondents seem to seek a balance between growth and preservation.

“One strategy that may help some LGBTQ retirement savers balance investment goals such as growth and safety is the use of target date funds (TDFs) when available through their employer’s 401(k) or other retirement savings plan,” Cannon said.

“TDFs automatically reallocate retirement savings between equities and fixed-income, gradually growing more conservative as the investor approaches and enters retirement. Some newer TDFs also are more personalized to investor’s individual needs, including a greater focus on managing assets in accordance with an investor’s individual risk tolerance.”




How Can I Get Disability Insurance?

Image of a man with the question: How can I get disability insurance?Disability insurance is one of the most important forms of insurance for working Americans. The financial expert Dave Ramsey calls it “a necessity.” It has been described as a valuable benefit by NPR while NBC News calls it “more important for singles than just about anyone.”

Having a form of income protection for when you’re injured, ill or pregnant is part of a solid financial plan. But how do you go about actually getting a policy? 

Here are your next steps:

1. Talk to your employer

If you have a full-time job, you may already have access to private disability insurance. According to the Bureau of Labor Statistics, at least half of U.S. non-government employees have disability insurance. So start by talking to your HR manager. 

Here are a few things you can ask:

  • If they offer disability insurance, is it employer-paid, employee-paid, or a combination of the two? The general rule is, if your employer pays some or all of the premium, then some or all of any benefits you collect will be taxable to you. Your employer may offer a voluntary plan where you will need to pay the entire premium. However, it grants you access to better rates — and any benefits you collect will not be taxed. Ask how much it costs and how you can sign up for it.
  • What is the benefit amount for the policy? It won’t be your full salary, as your employer wants some incentive for you to return to the job. Policies generally range from 40 to 70 percent of your salary.
  • How long will my payments last? A policy will indicate the maximum length of time that benefits will last. Long-term disability insurance may cover anywhere between two years through retirement age.
  • When will payments begin? This will depend on whether it’s short-term or long-term disability insurance. Both types of coverage include waiting periods. A waiting period is the time between when you leave work to have your baby or you are diagnosed with a condition that prevents you from working, and when payments begin.
  • What is the policy’s definition of disability? The definition of disability varies among policies and carriers. Some consider it related to you not being able to perform the duties of your specific job while others take into account your training and experience. You may carry a policy that pays you if you can’t perform your “own job,” “own occupation,” or “any occupation” that reasonably matches your knowledge, training and experience.
  • If you don’t have access to disability insurance at work: Ask why not. You could ask whether they would consider starting a voluntary policy for employees.

2. Talk to your financial advisor

If you aren’t currently offered disability insurance at work, or the amount they are offering won’t cover your basic living costs, consider purchasing individual insurance.

Your financial advisor or insurance agent will be able to help you identify the amount you need, the most suitable amount of time you’d want to receive payments, and which plan makes the most sense for your unique needs.

If you’re self-employed or a business owner, this is definitely something you should consider. (More on that here.)

3. Talk to associations

You can also access more affordable rates for disability insurance through a plan offered to members of a professional society — for example, the American Institute of Certified Public Accountants or the Freelancer’s Union — or a college alumni association. If you’re already a member of such an association, ask about their disability insurance offerings. 

4. Visit RealityCheckup.org

In the spring of 2018, The Council for Disability Awareness launched a new consumer microsite that unpacks what disability insurance is, why you need it, and how to get it. Visit the site to learn the language associated with various policies, and find useful links. You can also listen to CDA experts discussing the topic on radio talk shows.

5. Talk to our member companies

The member companies of The Council for Disability Awareness formed this nonprofit organization solely to educate consumers, employers, and financial advisors about working adults’ risk to be out of work for a period of time without a paycheck. View the member organizations here.

6. Lock in your coverage

The thing about accidents, illness and injury, is that you have no idea when they will happen. So this is the sort of policy you’ll want to lock in sooner rather than later. Bear in mind that like life insurance, your rates will also be cheaper the younger you are. By securing a policy now, you can relax knowing that a safety net is in place. 




How Many Working American Households Lack Private Disability Coverage?

Image of a house with wording: 50 million households in the US do not have private disability insuranceBy Andrew Melnyk, Chief Economist and Vice President of Research, American Council of Life Insurers

Last week, Fred Schott of The Council for Disability Awareness outlined an approach to answering the following question: how many working Americans have (or don’t have) some form of private disability coverage?

It is an important question because, as we know, Social Security Disability Insurance (SSDI) does not provide sufficient protection for most families. The American Council of Life Insurers (ACLI) can provide another way of answering this question.

In September 2017, the ACLI issued a report titled Assessing Americans’ Financial and Retirement Security that was based on extensive survey data. The data was gathered with respect to households, and not individuals — the same approach the Federal Reserve takes in its periodic Survey of Consumer Finances. One of the questions asked (but not directly addressed in the report) was whether anyone in the surveyed household was covered by a private disability insurance policy, issued on either a group or individual basis.

What is the definition of ‘household’?

Here’s how ACLI (along with the Federal Reserve and other entities that track consumer data on this same basis) categorizes households:

Per Census Bureau data, there are a total of 125.8 million households in the U.S. Our data indicates about 31.4 million (25 percent) of those are “retired” and the remaining 94.4 million (75 percent) are “non-retired.”  

A handful of “retired” households may still have some kind of attachment to the labor force — for example, a two-person household where one partner works 20 hours per week in a post-career job and the other is fully retired.

Because entering retirement is increasingly a multi-stage process rather than a specific date (i.e. more people are easing into it, perhaps by working part-time), that handful is likely to get larger. But that said, let’s make a simplifying assumption that disability coverage is applicable only to the “not retired” households.

The answer: 51.3 million

Our survey data revealed that less than half (45.7 percent) of “not retired” households have some form of private disability insurance. So, 43.1 million households in that category have at least some coverage. But more than half, some 51.3 million, don’t have access to private disability insurance. The latter number is very much in the same ballpark as what Fred came up with in his post.

To learn more about disability insurance and how it protects your income, visit RealityCheckup.org 




Genetic Testing at Work

DNA strandsDo the rewards of genetic testing of employees outweigh the possible risks it presents to their financial stability?

This article by Carol Harnett, president of The Council for Disability Awareness, was recently published in Human Resource Executive.

I became intrigued with genetics in sixth grade. I still recall being fascinated when Mrs. D’Amato described Gregor Mendel’s work with pea plants that allowed him to unravel the fundamental laws of inheritance. Her introduction of the Punnett square, with its dominant and recessive alleles, and monohybrid and dihybrid crosses had me running home to decipher the keys to my ancestry with my parents.

Over time, I discovered that the MC1R gene was responsible for my red hair and freckles, and those traits, in combination with my blue eyes, placed me in the rarest of the ginger categories: a tribe that makes up less than 2 percent of the world’s population.

Genetics continued to grab my interest over the years, but that curiosity started to package itself with concern as more became known about human DNA. The first big pause I took to contemplate the impact of genetic information came when 23andme—one of the first direct-to-consumer genetic-testing companies—invited me to participate in a beta test.

It was 2008 and I was about to attend my first TED conference. The company invited the 1,000 participants to learn about their genetic profiles. I let the 23andme package sit on my desk for about a week. My internal debate revolved around whether I wanted to know if I had a genetic susceptibility for which there was currently no treatment. I finally caved in to my scientific interest, spit in the tube, sealed the envelope and overnighted my DNA to the company.

The results were anti-climactic. It turns out I have a remarkably solid set of inherited “wellness” characteristics. Or, at least I think I do.

The other traits the initial report listed (and still lists over the 10 years of updates) were laughingly off, including that I most likely don’t have freckles or red hair. And this gives me some pause as to whether my reported wellness variables are, indeed, correct.

I began to consider writing a column about genetic testing when someone passed me a copy of a survey of 14 disability carriers regarding whether they would pay the claims of women who underwent procedures associated with testing positive for inherited mutations of the BRCA1 or BRCA2 genes. (Approximately 72 percent of women who inherit a BRCA1 mutation and about 69 percent of women who inherit a BRCA2 mutation will develop breast cancer by the age of 80, while about 44 percent of women who inherit a BRCA1 mutation and approximately 17 percent of women who inherit a BRCA2 mutation will develop ovarian cancer by the age of 80.) Experts often recommend that women who carry these mutations consider both preventive bilateral mastectomies and removal of their ovaries and fallopian tubes by their mid-30s to early 40s.

There was wide disparity in the carriers’ responses to how they would process claims. Some considered bilateral mastectomies associated with a positive genetic test to be related to a pre-existing condition and, therefore, not payable. Others believed that preventive mastectomies related to a mutation of BRCA12 were elective procedures. As a result, the disability claim was not compensable under the elective-procedure provision. Still others would deny disability associated with subsequent breast-reconstruction surgeries under the elective-surgery and/or cosmetic-surgery provisions.

The range of answers and the logic applied by some providers regarding BRCA12 mutation carriers were shocking to me. But, there was a moment of hope when I reviewed a similar question asked about disability claims related to organ donation.

When I first joined the disability-insurance industry in the late 1990s, an organ donor’s disability claim was denied under the elective-procedure provision. Almost 20 years later, all but one carrier stated they would approve an organ donor’s claim—and the one carrier that wouldn’t pay the claim indicated it often made an administrative decision to approve the claim despite the contract.

As genetic testing becomes more common, I believe the carriers will rethink their positions (at least as it relates to women who learn they have genetic mutations after they enroll in disability coverage), or employers self-insured for short- and long-term disability will instruct the carriers or third-party administrators to pay these disability claims.

But here’s the catch that is up for debate: If people find out they carry a genetic mutation before they sign up for life, disability or long-term-care insurance, are they subject to denial of coverage due to a pre-existing condition, even though the genetic mutation may never “express itself?” The answer may be a qualified yes, depending upon the carrier and/or the state in which the person lives.

The Genetic Information and Nondiscrimination Act of 2008 prohibits employers and health-insurance companies from discriminating against people due to genetic information. However, when the act was passed, life, disability and long-term-care insurance were consciously omitted. This omission allows life and disability insurers to legally discriminate against people with genetic conditions or risk factors that predispose them to diseases—which brings me back to direct-to-consumer genetic testing.

There is a new trend among D2C companies such as Color Genomics, which wants employers and HR leaders to offer genetic testing to employees as an employee benefit. And while I, like many with my background, see the power of genetics as it relates to precision (or personalized) medicine, I’m incredibly concerned about how employers could inadvertently destabilize their employees’ financial wellness.

If employees do not currently carry individual life, disability or long-term-care insurance prior to participating in genetic testing, and they find out they possess a genetic abnormality, they may never be able to enroll in this coverage in the future. Even if you provide employer-paid life and disability coverage to your workers, if they leave your employment, they may not take their life insurance with them—and their disability coverage is not portable…

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Best Disability Insurance Companies for Startup Employees

Startup team

Many people dream of starting a company or joining a startup. It’s your chance to make something of your own or to start on the ground floor of something important and potentially world-changing. It also offers the flexibility and culture many people value.

But there’s high risk with that reward. Startup founders and early employees often come from corporate jobs. They sacrifice pay and benefits for the prospect of building something great. One thing they need to focus on building? Their benefits package, including long-term disability insurance.

Why startup employees need disability insurance

It’s hard to get an exact count of how many startups there are, but it’s safe to say the answer is, “A lot.” AngelList, a company that helps connect startups to funding and talent, has more than 35,600 startups in its database.

As startups become a more popular form of employment, more people will find themselves with jobs that may not provide the financial safety net they need. One in four workers will become disabled before they retire. If you don’t have disability insurance, whether you’re a company founder or employee, you’re putting yourself at risk of not being able to make ends meet and potentially forcing yourself to have to go back to the corporate grind to get yourself on stable ground.

Startup founders

Founders are the lifeblood of any startup. They often set the vision and tone for the company, and take a position of power as the chief executive officer, chief technology officer, chief operating officer, chief financial officer or chief marketing officer. But they often don’t have the salary or benefits those positions come with at a more established company. Every bit of income and protection counts when a company is just getting off the ground.

If a startup founder becomes injured or ill, it becomes hard to keep up with bills. If that happens, they might need to find a job that’s more stable or has higher pay — that means giving up on their dream. With disability insurance, a founder has a financial safety net that will allow them to return to their company when they recover instead of working elsewhere just for a paycheck.

Startup employees

Most early startup employees have invested a lot in their education and development, whether they’re software engineers, product managers or operations managers. They need to protect their future income potential, especially when benefits are at a minimum.

Most startups choose health insurance as their priority benefit, for good reason. That still leaves employees to fend for themselves when it comes to retirement contributions, life insurance and disability insurance.

Startup employees may not be able to get the full disability benefit amount due to lower startup incomes. But if you work with an independent broker (like Policygenius), there may be discounts available if multiple employees sign up for disability policies.

 

Table

These sample rates are based on a male non-smoker from New York with a degree and income of $100,000. Your exact coverage will vary by your state, income, (or past income, which we’ll get to below) and other factors. You should talk to a licensed broker or agent to find the policy you need.

These policies are also based on a $5,000 monthly benefit, a 90-day elimination period and a benefit period to age 65. They are own-occupation, partial benefit, non-cancelable policies with a future purchase option and automatic increase benefit.

What startup employees need to know about disability insurance

As a startup employee, your income might be lower than what it was at a more established job, but it could also be higher in a few years if your company finds its footing. Still, there are ways to get affordable, comprehensive coverage.

  • Know how much coverage you can get: Your disability coverage is typically based on your income. But if you’re working at a bootstrapped startup, you might not be getting paid that much. How do you get enough protection? Some insurance carriers base the maximum coverage for startup founders on the founders’ previous job or their industry. That means you don’t need to necessarily base your coverage on what you’re actually making when you apply.
  • Have the right documentation ready: Keeping that in mind, it’s important to have the right paperwork to make things easy. To prove your benefit needs, you should have past tax returns or signed contracts ready. This will help carriers know you’re not over- or underinsured.
  • Look for discounts: Getting protected doesn’t need to be expensive. If three or more employees set up policies with the same carrier, you may be able to tap into discounts. This isn’t the same as a group disability policy offered by many employers. Those typically don’t provide adequate coverage, and they’re tied to your job so you lose the policy if you go elsewhere. In this case each person owns their own policy, but a broker can help you save on cost if there are multiple applicants. Think of it like buying in bulk at the grocery store.
  • Choose a future purchase option rider: Long-term disability insurance riders allow you to customize your disability policy so it fits your specific needs. Some come default on policies while others cost extra. An agent can help you figure out which ones you might need. One rider startup employees should consider is the future purchase option. This lets you increase your coverage amount down the line without needing to go through the underwriting process again, “locking in” your insurability. This is especially important for someone working at a startup, since growth can be faster than at established companies, allowing your coverage to keep pace with the potential increase in income.

This article originally appeared on Policygenius. The Council for Disability Awareness is an affiliate partner of Policygenius.