A BRIEF LOOK AT DISABILITY INSURANCE
Few people realize that their most valuable asset is their ability to earn an income. Like any asset it is important to obtain the necessary protection on that asset. With this mind set, any unforeseen events which may endanger one’s ability to earn a paycheck need to be accounted for. Fortunately, such protection is available in the form of Disability Income Insurance (DI). The purpose of disability insurance is to replace all or a portion of the lost income incurred should you become disabled and unable to work. Income received from a DI policy can be used for a wide range of needs: mortgage payments, daily living expenses, educational expenses, medical bills, or insurance premiums, etc.
Disability Income Insurance is a critical component of every sound financial plan. It is important to understand that Social Security does not provide an adequate form of protection. “Only 39% of Social Security disability claims are approved and when approved the average monthly payment is only approximately $1,000.” – Social Security Administration. The lack of support provided by social security leaves the responsibility of obtaining income replacement protection in your hands.
DISABILITY OCCURRENCE RATES
What are the chances you will become disabled from earning a living?
- Approximately 3 in 10 workers entering the workforce today will become disabled before retirement.
– Social Security Administration, Fact Sheet, January 31, 2007
- In the last 10 minutes, 498 Americans became disabled.
– National Safety Council®, Injury Facts® 2008 Ed.
- In the U.S., a disabling injury occurs every second, a fatal injury occurs every 4 minutes.
– National Safety Council, Injury Facts 2008 Ed.
- 51.2 million Americans have some level of disability. They represent 18% of the population.
– U.S. Census Bureau, July, 2006
- Accident or illness will force 1 in 5 U.S. employees to miss work for at least a year before they turn 65. – 2005 Field Guide to Estate Planning, Business Planning & Employee Benefits, by Donald Cady
- 43% of all people age 40 will have a long-term disability event prior to age 65.
– JHA Disability Fact Book, 2006
- The average long-term disability absence lasts 2½ years. – JHA Disability Fact Book, 2006
THE FINANCIAL CONSEQUENCES OF A DISABILITY
How long can you and your family afford to go without a paycheck?
- Unexpected illnesses and injuries cause 350,000 personal bankruptcies every year. – “Illness and Injury as Contributors to Bankruptcy” Health Affairs, February 2, 2005
- Harvard University reports that 62 percent of all personal bankruptcies filed in the U.S. in 2007 were due to the inability to pay for medical expenses.
- Disability causes nearly 50% of all mortgage foreclosures, while 2% are caused by death. – Health Affairs, the Policy Journal of the Health Sphere, 2 February 2005
- In 2007, the employment rate of working-age people with disabilities in the U.S. was 36.9%. – U.S. Census Bureau, American Community Survey, 2007
FEW ARE PREPARED FOR A DISABILITY
- 71% of American employees live from paycheck to paycheck. – American Payroll Association, “Getting Paid in America” Survey, 2008
- Over 50% of the workforce has no private pension coverage and a third have no retirement savings.
– Social Security Administration, Fact Sheet 2007
- Over 100 million workers are without private disability income insurance.- Council for Disability Awareness, Long Term Disability Claims Review, 2005
- 70% of the private sector workforce has no long-term disability insurance. – Social Security Administration, Fact Sheet January 31, 2007
THE SOCIAL SECURITY & WORKERS’ COMPENSATION MISCONCEPTION
- Can your family live on $1004 a month? That’s the average monthly benefit paid by Social Security Disability Insurance (SSDI).– Social Security Administration, Fact Sheet 2008
- More disability claims are denied than approved. More than half of the 2.1 million workers who applied for SSDI benefits in 2005 were denied. Less than half – 39% – were approved. – Social Security Administration, Office of Disability and Income Security Programs
- Only 10% of disabling accidents and illnesses are work related. The other 90% are not, meaning Workers Compensation doesn’t cover them. – National Safety Council, Injury Facts 2008 Ed.