The Council for Disability Awareness (CDA) recently released a consumer research study—The Disability Divide—which reveals a severe disconnect between what consumers believe about disability and income protection planning and the actual facts about the two issues. Armed with the following information from this survey, you should be able to make a very effective sales presentation on why your clients need disability insurance.
CDA conducted the online survey with a nationwide panel of wage-earning consumers. The questions were designed to understand workers’ perceptions about disability, identify actual behaviors related to these perceptions, determine the level of preparation workers have taken to protect themselves and their families from the risk of a disability, and learn to what extent workers are positioned to deal with an income loss caused by an illness or accident.
Nearly all respondents—90 percent—rated their ability to earn an income as more valuable than any other resource in maintaining financial security. However, only 37 percent of respondents said they had thought about taking steps to protect their income and only 22 percent said they don’t think about it because they have disability insurance. Surprisingly, 13 percent said they had enough savings to cover their bills.
Respondents significantly underestimated either their own or others’ chances of becoming disabled. More than half believe that only one in 100 or one in 50 working Americans are likely to become disabled during their working careers. Only 7 percent of the survey respondents came close to predicting their chances accurately.
Those who knew someone who had been disabled were much more likely to think there was a higher chance they’d become disabled. In fact, 27 percent of this group thought their own odds were at least 1 in 10.
The Social Security Administration estimates that 3 out of 10 Americans entering the workforce today will become disabled before they retire. This statistic is supported by CDA’s Personal Disability Quotient calculator as well as publicly available actuarial tables. Be sure to go to www.whatsmypdq.org for more information on CDA’s Personal Disability Quotient. At this website, you will find an excellent tool for you to use with your clients—it will certainly provide your clients with unbiased, eye-opening information.
When asked what income source they would likely use should they become disabled and unable to work, 40 percent said they would rely on employer-funded sick/vacation leave. Other perceived sources of income are shown in the following chart.
Where Would The Money Come From When Disabled?
Disability Insurance 38%
Spouse/Partner Income 36
Debt (loans, credit cards) 34
Friends or Family 32
Sale of Possessions 32
Retirement Savings 31
Government Programs 30
Household Savings 24
More than two-thirds of respondents thought that a disability would put a person out of work for a year or more, and almost one-third said that person would never return to work.
According to the Social Security Administration, 70 percent of employees in the private sector are not covered by any type of private long term disability insurance.
In fact, even when offered as a voluntary benefit by their employers, almost 40 percent of workers don’t choose long term disability insurance. And barely 30 percent claim to understand it very well (CDA 2008 Worker Disability Planning and Preparedness Study).
Even the likelihood of receiving government benefits from the Social Security Disability Insurance (SSDI) program is dwindling. Although most private sector employees are covered by SSDI, benefits are limited. The average monthly SSDI benefit amount in 2009 was $1,064, with 56 percent of recipients receiving less than $1,000 per month. Qualifying for SSDI benefits is very difficult; 65 percent of initial benefit applications were denied in 2009, and the appeals process can last up to four years. SSDI approval rates have steadily declined in recent years. (Social Security Administration, Disabled Worker Beneficiary Statistics, www.socialsecurity.gov/OACT/STATS/dibStat.html). An excellent chart to back up this information with a client can be found at www.disabilitycanhappen.org/images/research/SSDI.jpg.
CDA’s report can be viewed in its entirety, as well as a wealth of other information, at www.disabilitycanhappen.org/research/consumer. However, before you head to that website, be sure to read what the authors in this issue have to say! [SAC]
