I was having lunch with one of my very best friends yesterday. We were discussing how quickly our kids grow up. He and his wife had just returned from attending their eldest son’s college graduation. As he was telling me about the fun of the graduation process and the self-centeredness that is so apparent in youth, he chuckled and shared a cute story …
When their son was only 2 years old, my buddy had been correcting him—as most 2-year-olds need to be corrected. My friend had told his son repeatedly to stop doing something that was dangerous. After being told four or five times, the young lad calmly walked over to his daddy, put his young hands on either side of dad’s face and said with all the sincerity he could muster, “Daddy, don’t you know? MY do what MY wants to!”
That story has been told in my friend’s family time and time again. While they raised two additional kids, the story served as a constant reminder that while kids may think that the world revolves around them and allows them to do anything and everything they want, we, as parents and adults, really do know what’s best for our children … and our family.
It kind of gives me this visual picture of my own family, or for that matter, any family growing together: Parents struggling to raise the kids the right way and kids struggling to understand why mom and dad have to make hard decisions, yet watching how hard mom and dad work to provide for and nurture their family. It’s not until the kids get much older that they really understand all the sacrifices and selflessness that parents must invest to keep the family safe, secure and on the path to maturity.
A key part of that sacrifice is financial security. I won’t get on my soap box, but as you have this mental picture in your mind of your family, or for that matter, any family, pause for just a minute to consider what happens if mom or dad should die while the kids are young. Happiness and financial security become much less certain. The remaining parent has to double down on the family effort with little time for themselves to grieve and mourn the loss of a spouse.
Life insurance, if purchased previously, can’t help with emotional side of loss, but it sure can help provide security, peace of mind, time to adjust, as well as funds for education, housing and other expenses associated with the loss of the income of the deceased parent.
Think about this way: If parents were to take the same selfish approach of “MY do what MY wants to,” the family unit would be much less stable. Thankfully, many parents make that life insurance decision … just in case.
In Penn Mutual’s 3rd annual Worth for Women Survey, women and men were asked to place a dollar value on the work they do away from their jobs. Both groups put the dollar estimate at around $25,000 per year. Respondents were then asked to list the hours they spent doing a variety of work or services, such as laundry, meal preparation or child care. When Penn Mutual calculated the value of the actual hours reported doing household jobs, they found that men overestimate the value of what they do by almost 13%. In contrast, women were found to underestimate the worth of all they do for their homes and families.
When the actual median value of services was computed, a woman’s contribution to the home was $34,256 versus $19,322 for men. Men were 9% more likely to overestimate their contribution by $30,000 or more. Remember, this is for household activities. The person most likely to underestimate her worth is the mother of a minor child. Her computed worth is $44,913 while her perceived worth is only $29,000. Over half (52 percent) of these women underestimate their worth by at least $10,000; 36 percent do so by at least $30,000.
While the survey may suggest that men have begun making more meaningful contributions to household operations, there are serious consequences for both women and men who underestimate the value of what women do aside from outside employment.
Penn Mutual states they often see evidence that women underestimate their value to their families—with serious or tragic consequences when that work has to be replaced by outsiders after the untimely death of a wife or mother. This survey revealed that women own significantly less coverage than men do, with the median individual coverage amount for women being $100,000 as compared with $150,000 for men.
While it may be possible for other family members to fill the gap of a missing mom, there will still be costs associated with this. So, how much is the wife or mother worth? Let’s assume it will be 15 years before the children leave home. At $40,000 per year of services, it would take $400,000 of capital with a withdrawal rate of 10% per year invested at 5% per year to replace her services for 15 years. At the end of the 15 years, the capital will have been fully used.
How do you create $400,000 when it is needed the most? Life insurance. Talk to your agent or advisor about this today. And if you don’t have one, you can use the Agent Locator tool.
Workers starting out today are projected to have about a three in 10 chance of experiencing a long-term disability during their working years. Yet, despite such daunting odds, nearly 70% of America’s workforce has no private disability insurance.
In conducting a recently released consumer research project entitled “The Disability Divide,” the Council for Disability Awareness found out some interesting facts:
Employees believe that “disability can happen to anyone at any time” … but they deny it can happen to them.
When asked to choose which of several statements about disability was most reflective of their belief, an overwhelming 83% of respondents chose “it can happen to anyone at any time.” Other choices like “it happens infrequently” (5%) and “most disabilities can be avoided through healthy lifestyles” (6%) were mostly ignored.
Survey participants estimated their chances of experiencing a disability during their working careers at 1% or 2% … while the actual odds are 10 or more times higher.
When asked about their odds of becoming disabled during their working careers, 64% pegged their own chances at either 1% or 2%. Most thought their own odds were below average. So while they recognize that disability can happen, they think it will happen to the “other guy,” and not very frequently at that.
Wage earners overwhelmingly believe disabilities are typically caused by serious accidents … but most data show 90% or more of disabilities result from illnesses.
When asked to rate different likely causes of disability, 71% rated “serious accident” as likely or very likely. The next most highly rated cause was “stroke,” a distant second at 45%, which was followed by “cancer” with 43% choosing it as a likely or very likely cause. Generally, the most commonly picked expected causes of disability were vivid, one time, catastrophic events (accident, stroke, heart attack, cancer, paralysis) while other more chronic type conditions such as muscle or bone pain (26%) and depression/anxiety (14%), which actually cause a high percentage of disabilities, were thought to be less likely.
Employees perceive that disabilities last for a long time … but less than one-third of America’s workforce is covered by adequate long-term disability income protection.
Nearly 70% of respondents thought a person who experienced a disability would miss work for one year or more; amazingly, 31% said the person would never return to work. The “catastrophic perception” of disability noted above is reflected in this response. Still, roughly 70% of the American workforce has no private disability insurance.
Where would the money come from?
Here are some questions you should answer as you consider your disability insurance needs:
How much are your monthly living expenses that would continue—or even increase—if your income stopped? Did you consider an illness or accident typically increases “out of pocket” expenses like medical deductibles and co-pays, and the cost of accommodations or custodial care?
How would you pay your necessary monthly living expenses if your paycheck stopped? How long could you continue to pay your bills?
Do you know that the average long-term disability lasts for 2 ½ years?
Do you have a sick-pay plan or long-term disability program at work? When would it start? How much would it pay and for how long? Is there a gap between what the program pays, and what your anticipated monthly expenses will be?
What if you deplete your personal and retirement savings? How will that affect your long-term financial picture and your dreams for the future?
Take advantage of the disability related educational tools that the Council for Disability Awareness and LIFE Foundation make available and make sure you get the disability insurance coverage you need.
Barry Lundquist, CLU, is president of The Council for Disability Awareness.
A good laugh, right? But the message is serious. If you aren’t protecting your paycheck with insurance the way you do with your other valuable assets—your car and home—then you need to do something about that. This site, www.protectyourpaycheck.org, can help you get started.
The LIFE Foundation’s “This Moment Made Possible by My Paycheck” photo contest got me thinking about all of those great moments in my own background, and how important our paychecks and our ability to earn an income are to each of us and our families. With that in mind, I offer this “pop quiz” that CIGNA developed to help people gauge and build their awareness of disability insurance.
1. True or False: People who work don’t need disability insurance because they’re covered by Workers’ Compensation insurance. Answer: False. Workers’ Compensation insurance only covers injuries or illnesses acquired on the job, while the majority of accidents and illnesses are not work-related, according to the National Safety Council.
2. True or False: People who work can rely totally on their accrued sick leave if they miss work due to illness or injury. Answer: False. A disability-related absence can last a lot longer than an individual’s accrued sick time. Disabilities aren’t necessarily catastrophic events, but can range from broken bones, pregnancy, surgery, treatment for an illness, etc. Recovery time is unique to each situation.
3. True or False: Most people have enough money saved to cover their living expenses if they can’t work because of a disability. Answer: False. Disabilities can last many months or even years, and many people haven’t saved enough to cover living expenses for that long.
4. True or False: Short-term disability covers a portion of an individual’s wages for a year. Answer: False. Short-term disability insurance generally covers individuals for up to about six months, while long-term disability insurance provides coverage for longer periods of time.
5. True or False: People who work don’t need disability insurance as long as they have medical insurance. Answer: False. Medical insurance offers protection for covered medical expenses, but won’t replace income that’s needed to pay a mortgage, car payment or other household bills.
If you scored three or more right answers, good for you! But no matter how well you did on the quiz, there’s much more you can learn about disability insurance. The LIFE Foundation offers many great resources at www.protectyourpaycheck.org.
While the value of having disability insurance can’t be overstated, it’s also important to be aware of programs that can help prevent disability.
Use your Employee Assistance Program (EAP). Many employers offer an EAP that can help individuals cope with stress, depression, substance abuse and work/life balance. Many disability absences are related to behavioral health issues such as these, so EAPs can play a critical role in helping people stay healthy and avoid a disability absence. EAPs are free to the employee and completely confidential.
Stay well and minimize health risks. Many employers offer programs to help you quit smoking, lose weight, eat better, sleep better, manage stress or get more physical activity. Like an employee assistance program, these health and wellness programs are usually free to the employee; so if you have them, use them.
Manage a chronic condition. Programs that help people manage chronic conditions such as asthma, diabetes or heart disease are also important because they can help prevent a chronic illness from leading to disability. A CIGNA study shows that people who enrolled in a chronic care program and experienced a disability missed nearly four fewer days than those people with a chronic condition who didn’t participate in a program.
Be sure to take a moment during May’s Disability Insurance Awareness Month to learn about this important coverage. It could be the most important thing you do for your financial security and well-being.
