The Hidden Value of Social Security Disability Insurance: Why It’s Important During Benefits Enrollment
Recently, the Consumer Federation of America (CFA) and Unum released the results of a long-term disability survey. For the survey, they polled more than 500 benefits decision-makers at small employers.
The findings reveal that employers understand the value of this insurance for employees—whether they offer the benefit or not.
It also found that those who offer long-term disability insurance believe it serves the interests of their company.
Why Some Small Employers Don’t Offer Long-Term Disability Insurance
A few trends emerged among small employers that don’t offer long-term disability insurance.
- Employers that don’t offer long-term disability insurance are more likely to overestimate the cost of coverage.
- Employers that don’t offer long-term disability are also more likely to underestimate the desire of employees for this coverage.
- When they do have employees with disabilities, the small employers who don’t offer long-term disability insurance are more likely to experience difficulty managing disabled employees and their absences.
Stephen Brobeck, the CFA’s executive director, offered perspective on this issue:
In general, group disability insurance serves the interests of small employers and their employees … By making this insurance available, employers help protect the personal income needed by consumers.
Why Long-Term Disability Insurance is So Important
Richard P. McKenney, president and CEO of Unum, explained the importance of disability insurance coverage from small employers:
The ability to earn a living—our income—is the most valuable asset we have, and protecting that asset is increasingly important. Small employers can play a significant role in helping their employees insure against some very real risks to their financial stability.
Notable results from the survey:
- Fully 94 percent of employers said they disagree that “most employees have enough savings to cover normal living expenses if they become unable to work due to illness or injury.”
- Only 13 percent of all respondents believe Social Security and workers’ compensation “will cover most of a worker’s income if they become injured or ill.”
- Employers estimated 60 percent or more of their employees would face significant financial hardship if they were disabled and unable to work for at least six months. These hardships would included outcomes such as home foreclosure and bankruptcy.
- A vast majority—86 percent—of those interviewed agree it is important “for employees to have long-term disability to protect them financially if they became disabled.”
- According to LIMRA, less than half—only 47 percent—of employers with between 10 and 99 employees offered long term disability insurance in 2014.
- And, based on the current survey results, less than half of these small employers have a policy in place for handling employee absences due to serious illness or injury.
Employers Without Long-Term Disability Often Misunderstand Employee Interest
Many employers without long-term disability insurance suggested they don’t carry it because employees wouldn’t want it. When asked why their company did not offer long-term disability, about two-thirds, 64 percent, indicated that “the cost is too high for employees.”
More than half, 57 percent, said “not enough employees will enroll.” Another 40 percent said that “employees would not value or appreciate the benefit.”
Yet, a survey conducted in 2012 found that 86 percent of U.S. workers would choose to have disability insurance even if they had to pay some of the cost for it.
Employers With Long-Term Disability Insurance Think It Benefits Both Them and Their Employees
Employers with long-term disability insurance believe this coverage serves the interests of its employees. A large majority say employees value and appreciate the benefit.
Eight in 10 also believe that offering long-term disability is “what a responsible employer does.”
But they also believe it is not just the employees who benefit from this coverage:
- Most respondents, 82 percent, report that they offering long-term disability insurance is valuable for attracting and retaining employees.
- Another 55 percent say they offer it in order to reduce company costs if an employee goes out on disability.
- Additionally, 50 percent say offering long-term disability insurance also improves productivity. Specifically, that the coverage “gets employees back to work faster.”
The survey also suggests employers that offer long-term disability have an easier time managing disability-related absences: Those who offer long-term disability were far less likely than those who do not to say that their experience managing a disabled employee’s absence was difficult.
That amounted to 28 percent versus 46 percent of those who did not offer long-term disability.
How the Survey Was Conducted
This online survey of benefits decision-makers was conducted by independent research firm Greenwald & Associates on behalf of CFA and Unum in April 2015. A total of 504 benefits decision-makers at companies with 10 to 99 employees participated in the survey.
Additional information is available at unum.com/cfastudy.
This article was adapted from Unum
Photo by Chris Brown via Flickr. Illustration via Canva.com
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