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Disability Insurance? Employees Just Aren't Buying It

Did you know that May is Disability Insurance Awareness Month, a time to get employees thinking about the need for disability insurance?

I didn't know either, until I read a new survey from the LIFE Foundation that finds employees are more likely to buy car and home insurance than employee disability insurance.

84% of the employees the LIFE Foundation surveyed strongly agreed that it's important to insure a car while 80% said it's important to buy homeowners insurance. But just under half (48%) think employee disability insurance -- that is, income they'll keep collecting if they must stop working temporarily due to injury or sickness -- is worth buying.

Communication is a big problem. One-quarter of the employees surveyed didn't know if their company even offers disability insurance. About 41% knew the employer offered it but they didn't understand what's covered or how disability insurance works.

Employees didn't understand the financial impacts, either. Almost 40% (39%) didn't know how much money they would take home if they had to use their disability insurance coverage, and 22% thought they would keep taking home most or all of their income. The problem is, disability insurance covers only about two-thirds of an employee's monthly pay. Uh, oh.

Hey, companies, as Ricky Ricardo used to say to Lucy: "You have some 'splainin' to do!"

The LIFE Foundation concludes that employees are more worried about protecting their valuables (cars, homes...) than the very thing that makes the car and house possible: their paychecks. Isn't it ironic, dontcha think? Alanis Morissette references aside, I'm not surprised car insurance would be top of mind for employees since states require drivers to buy it and it's expensive. Their homes are their biggest financial investment so of course they want to insure them, too. It makes sense to me. And "You Learn" is still Alanis Morissette's best song.

But disability insurance? It feels like just another deduction when money is already tight and employees are still losing jobs. Factor in employers' inability to explain the basics of disability insurance, and it's easy to see why most employees aren't buying it. Why bother? It also depends a bit on the nature of the job. Working in a coal mine carries a much higher risk than being a desk jockey who might occasionally get a paper cut, for example. Hey, I'm not knocking paper cuts. They sting! Especially when they get wet. But I digress.

By the way, the LIFE Foundation is sponsoring the "Where Did My Paycheck Go?" Challenge all month long where you can list the seven biggest expenditures in your monthly budget and be entered into a drawing to win a $1,000 paycheck. No word on whether or not disability insurance will be deducted.

Comments

  1. Thanks for highlighting Disability Insurance Awareness Month and the fact that there is a lot of misunderstanding surrounding the importance of disability insurance. One myth that continues is what you mention in your post, "Why bother? It also depends a bit on the nature of the job." While that is true in some respects--yes, you are more likely to get hurt in a coal mine than in a cubical, that fact remains that 90 percent of disabilities are due to illness, not injury. And illness doesn’t care if you work in a mine or a cubie.

    ReplyDelete
  2. Great point, Maggie. Thanks for posting. ~Chris

    ReplyDelete
  3. It's true that 90 percent of our disabilities are caused out of illness. It's painful at times if you get compensated for a smaller amount and not the entire policy limit.

    Once you're disabled due to any illness, the insurance company pays you for the wage loss for that particular period of time. Again the payout depends upon the disease that you're suffering from. Under such circumstances, Critical illness insurance can be a better alternative for your disability insurance policy.

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