In the current open enrollment season for 2012 benefits, more employers are asking workers to put some of their own money up for high-end disability coverage. This trend appears to be catching up with other employee benefits such as traditional health insurance which has seen increasing employee cost-shares for several years.
“We are seeing some gradual slide to more employee financial responsibility for long-term coverage,” reports Rich Fuerstenberg, a partner with benefits consultant Mercer told the Insurance Journal. “The employers who used to provide the entire cost now may provide a core benefit and allow workers to buy up their coverage.”
Employers are also limiting short-term disability benefits and lengthening the waiting period before long-term coverage kicks in, says Stephen Mitchell of Unum Group.
More than half of all employers, 53 percent, required their workers to pay the full cost of their long-term disability coverage by 2009, according to the most recent data from insurance industry research group LIMRA. That’s up from just 41 percent from 2002.
Workers looking at disability insurance in the current open enrollment season have a number of options and decisions to consider:
- Should they buy into the group plan or buy private coverage?
- Should they pay for bigger monthly benefits, an earlier start or coverage that pays them if they can’t work in their chosen field? or
- Should they take a pass completely, on the theory that they are healthy, unlikely to become disabled and would prefer to work.
The kew decision point for employees is what can they afford to lose. Few employees these days can afford to lose a month's salary, but they may get by with a weeek or two without pay. Far fewer are prepared if they suddenly become totally and premanently disabled. Consider this: a client becomes totally disabled forcing them to quite their $80,000 plus annual income job and now face a mountain of medical bills. Should they count on Social Security disability benefits, at an average of $1,070 a month, to cover theri lost wages?
This is why obtaining disability income insurance while young can be an advantage, despite the very slim chances that a client will need it in the forseeable future.
In fact, though disability coverage is often sold with scary numbers — the Social Security Administration estimates that a person in his or her 20s has a 30 percent chance of becoming disabled over the course of a career — the real chances of a serious permanent disability are far lower. According to Census Department figures, 6.9 percent of working age people are prevented from working because of a disability at any one time.
And disability coverage is actually priced on the basis of even lower numbers. According to industry data, the chances that someone will become “totally and permanently” disabled are more like five out of 1,000, says Mitchell Andrews, a disability broker with Plexus Groupe in Chicago.
Some people — particularly white collar professionals — eschew disability insurance on the theory that they will be able to work no matter what: The “I can always stagger over to my computer” theory.
Furthermore, disability insurance is priced based on profession. The manual laborer has a higher chance of having a health problem that renders him unable to work; his policy for the same amount of benefits would cost more. (Workers can guesstimate their own chances of becoming disabled with the council’s online calculator at http://www.whatsmypdq.org).
So, disability coverage is one of those bets that make sense and provides security against potential loss, but that you hope to actually lose money on by never needing it.