Monday, May 20th, 2013 | Barry Lundquist | |
Many people get their benefits through work and regard them as an important part of their total compensation package. Last August, the Council for Disability Awareness (CDA) surveyed over 500 human resources professionals whose job it is to help employees understand, navigate and take advantage of these benefits. This May it released the study
“Disability Divide: Employer Study;” here are some of the insights the HR professionals shared:
- 73% said they thought their company’s employees considered “the ability to earn an income” to be their most valuable financial resource … more valuable than their retirement savings, homes or their medical insurance. Yet only 26% thought their employees considered it “very important” to prepare for disability, and only 26% thought their company’s employees were prepared to financially survive an illness or injury related income loss.
- In a previous research project when CDA surveyed over 1,000 wage earners, the wage earners themselves recorded similar responses. They overwhelmingly said “their ability to earn an income” was their most valuable resource, but when asked their degree of agreement with several statements about their attitude about preparing for disability, the one they were most likely to agree with was: “I have never really thought about it.”
- Most of the HR experts thought employees should plan for disability at young ages, but recognized the reality that most don’t plan until they are in their 40s, or 50s, or never. This impression is borne out by fact: roughly 100 million members of the U.S. civilian workforce have no private disability insurance.
- Finally, most of the HR professionals and the wage earners dramatically underestimated the risk of experiencing a disability during their working years.
Here are some facts:
From the Personal Disability Quotient (PDQ) calculator: a 35 year old male, average height and weight, office duties, average lifestyle, non-smoker and no health history still faces about a 13% risk of long term disability prior to retirement. For a woman age 35 with a similar risk profile, the chances are about 18% that she will experience a long term disability before retirement. During the surveys, when CDA asked the wage earners and HR professionals what they thought the odds of disability were, most answered either 1% or 2% – significantly lower than reality.
From the Earnable Income Quotient (EIQ) calculator, those same 35 year olds, if earning $50,000 annually today, are likely to earn something like $2.4 million before their working careers end; for most an almost incomprehensible sum.
If the typical 35 year old had $100,000 in cash, they would go to the ends of the earth to keep from losing it. Yet, considering their $2.4 million earnings potential, with risk of loss in the 13-18% range, most wage earners say “I’ve never really thought about protecting it.” Something is wrong with this picture!
Some takeaways:
Everyone who needs their income to survive financially, which is most everyone that works for a living, needs to protect that income. The risk of loss—and the value of the potential loss—are simply too high to ignore at any age.
Historically, it was considered less important for wage earners to protect their incomes as they got closer to retirement because many had defined benefit pensions, most had savings, dependent children were long gone, and homes were paid off. For many in their 50s and even 60s today, current income remains very important as they scramble to save enough for retirement when home prices and many investment portfolios have tanked, many are still supporting children, and some are even supporting grandchildren and parents. So income protection remains important.
For younger workers, many will never see a pension plan, future entitlements may not be as robust, they are likely to be sharing the cost of their benefits and making decisions about which benefits are most important, and most will change jobs relatively frequently. The bottom line is income for that group will be more important than it has ever been, and taking personal responsibility for income protection is clearly important.
Bottom line:
- The risk of disability is always too high to ignore, regardless of your risk profile. Low risk never means no risk.
- If you need your income, and most people do, you need to protect your income.
- The time to protect your income is now; once a disability occurs, there is little planning that can be done.
- For younger wage earners, it is easiest to obtain disability insurance, and the cost will be lowest, when you are youngest. Doing income protection planning at a young age not only protects the greatest amount of income for the longest period of time, it also protects one’s insurability. Just because you are healthy and can qualify for income protection insurance today, doesn’t mean you’ll be able to get it tomorrow. There is always a risk that future circumstances, health and otherwise, can make it difficult to find adequate income protection.
People are much more likely to insure the things they buy with their paycheck than the paycheck itself. New car? Insurance—check. New home? Insurance—check. New boat? Insurance—check. But few people ask themselves what would happen if that paycheck that pays for the car and house and boat suddenly vanished because you were sidelined from work due to a disabling illness or accident. That’s where disability insurance comes in. It provides an income until you’re able to return to work and earn that paycheck again.
May is Disability Insurance Awareness Month, so help spread the word about disabilities and the importance of disability insurance. Below are statistics and information that are “tweetable,” meaning you can share them simply by clicking on the fact you’d like to tweet and the tweet will be generated for you. And be sure to follow us on Twitter at @LIFE_Foundation.
1 in 4 workers would struggle with $$$ immediately if they were disabled and couldn’t work. http://lifehap.pn/166Vzce #DIstat
(Source: The Disability Survey conducted by Kelton Reseach on behalf of the LIFE Foundation, April 2012)
Only 31% of workers have long-term disability insurance to help them if they can’t work. http://lifehap.pn/166Vzce #DIstat
(Source: LIFE and LIMRA “Insurance Barometer Study,” 2012)
Can you live on $1,111 a month? That’s the avg disability payment from Social Security. http://lifehap.pn/166Vzce #DIstat
(Source: Social Security Administration)
Illness causes 9/10 disabilities! ALL workers need disability insurance, regardless of job. http://lifehap.pn/166Vzce #DIstat
(Source: Council for Disability Awareness, Long-Term Disability Claims Review, 2010)
Many young adults worry about money, but the clear majority don’t have disability insurance. http://lifehap.pn/166Vzce #DIstat
(Source: LearnVest/Guardian White, LIFE AND DISABILITY INSURANCE: WHAT 20-AND 30-SOMETHINGS THINK, 2013)
35% of young adults have disability insurance, compared with 57% who have life insurance. http://lifehap.pn/166Vzce #DIstat
(Source: LearnVest/Guardian White, LIFE AND DISABILITY INSURANCE: WHAT 20-AND 30-SOMETHINGS THINK, 2013)
1 in 4 of today’s 20 year-olds will become disabled before they retire. Start defending your income
http://lifehap.pn/1013svq #DIstat
(Social Security Administration, Basic Facts, Feb. 7, 2013)
Yikes: 21% of young adults say they don’t have disability insurance because their jobs aren’t physical. http://lifehap.pn/166Vzce #DIstat
(Source: LearnVest/Guardian White, LIFE AND DISABILITY INSURANCE: WHAT 20-AND 30-SOMETHINGS THINK, 2013)
Pregnancy may be exciting, but it can represent a disability that interrupts your income. Protect yourself http://lifehap.pn/1013svq #DIstat
More than 54 million Americans have a disability, so the likelihood of caring for a sibling with special needs or a disability is high. According to the Easter Seals Siblings Study sponsored by MassMutual, only one-third of respondents feel financially prepared to assume the responsibilities of being role.
“There is an undeniable bond between siblings, which can be especially close when one has special needs, but along with this relationship comes a unique set of circumstances and a great deal of responsibility,” says Joanne Gruszkos, founder and director of the SpecialCare Program, MassMutual. “For sibling caregivers, it’s critical to not only set realistic expectations, but also prepare financially, emotionally and physically.”
Commissioned in 2012, The Easter Seals Siblings Study revealed the insecurity and potential burdens sibling caregivers face throughout their lives.
- 60% wish they knew more about planning for their sibling’s care and finances.
- 40% say caring for a sibling with a disability has caused financial stress on their family.
- 29% spend up to 20 hours per week providing care
“The findings help us shape our support for families caring for someone with a disability and raise greater awareness about the challenges caregivers face,” says Patricia Wright, Easter Seals National Director of Autism Services. “There are more than 65 million caregivers in the United States and the Siblings Study paints a better picture of their needs, especially of those who are caring for a sibling.”
These 65 million people—29% of the U.S. population—provide care for a chronically ill, disabled or aged family member or friend during any given year and spend an average of 20 hours per week providing care for their loved one, according to the study “Caregiving in the United States” by the National Alliance for Caregiving in collaboration with AARP, November 2009.
If you want to insure you won’t become a burden for your siblings, take personal financial responsibility and make sure you have taken advantage of disability insurance through your employer and/or have purchased individual disability insurance from your insurance agent or financial advisor.
1,475,003. That’s the number Americans who’ve experienced a disabling injury or illness so far this year—that’s just Jan. 1 to April 30. That is a staggering number.
Imagine if that number included you, and you weren’t able to able to go back to work tomorrow to earn your paycheck. What would happen? Would you still be able to pay your bills? If so, for how long? If not, what’s your plan?
If you’re worried about this, you’re not alone. Results from the 2013 Insurance Barometer Study, conducted by LIFE and LIMRA, show that six in 10 people are concerned about being able to support themselves financially if they were unable to work. Incredibly, Only 50 percent of working Americans say they personally need disability insurance.
The truth is: If you work and rely on your paycheck, you should have a backup plan. That plan is disability insurance. It provides you an income if you’re unable to work due to an accident or illness. Nothing else does that. Health insurance may cover your doctor or hospital bills, but who pays your mortgage, rent, food and bills? If you tap into your savings or retirement money to meet those bills, how does that money get replenished?
Disability insurance gives you an income until you can return to work. Feel free to use to this easy Disability Insurance Needs Calculator to find out how much coverage you may need. Then talk to your HR department at work or an agent in your community who can help you better understand the importance of disability insurance in your financial plan. May is Disability Insurance Awareness Month—the perfect time to do it.
Have you heard of Generation D? I didn’t think so. But according to a recent report from consulting firm Accenture, Generation D is an emerging and important investor segment of the market.
Cyril Tuohy of InsuranceNewsNet recently published some details of Generation D saying that both the financial crisis of 2008 and the rise of social media as a means to access investment advice have given rise to a different kind of investor, one that is skeptical of financial advisors.
So, who is Generation D? Generation D is not defined by traditional generational divisions but by their behavior. They are 75 million 
strong representing a cross-section of so-called Millennials (26%), Generation Xers (48%) and the Baby Boomers (25%).
Members of Generation D are less likely to view advisors as a trusted resource for investment advice than previous generations, the Accenture survey found. For example, a total of 59% of Gen D members actively sought advice recently but only 40% looked to their financial advisor for guidance.
Generation D represents 44% of the U.S. population with nearly $27 trillion in assets that will be passed on to heirs in the coming decades, but they are skeptical of the markets. Accenture was surprised at how conservative the Millennials are and how they equate investing in the market to gambling.
Millennials the Most Skeptical
Generation D skepticism toward financial institutions is most prevalent among the Millennials, with this group of 21- to 30-year-olds seeking information across multiple channels to confirm or corroborate investment advice.
While 71% of Generation D Millennials are currently investing, only 22% do so through an advisor, the survey found, and as many as 28% of Millennials would not take a financial advisor’s advice without first consulting another source.
Gen Xers, meanwhile, are as likely to be self-directed investors as they are to use a dedicated advisor, while Boomers still value a personal relationship with their advisors, the survey found.
While the LIFE Foundation does not deal with pure financial products, we do consider ourselves experts in the area of life insurance and related products. Our goal is to make these products easier to understand through digital resources, social media, motivational videos and blogs.
According to Accenture, members of Generation D are often more conservative and risk averse than many advisors give them credit for, and they are going to expect digital, online and mobile channels to be “seamlessly woven into the overall customer experience,” the report said.
The LIFE Foundation has anticipated these needs and provides the financial community a wealth of digital resources for consumers and for agents and advisors to use with these skeptical investors in the new digital world.
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“Disability Divide: Employer Study;” here are some of the insights the HR professionals shared: