May is Disability Insurance Awareness Month, which is an ideal time to make sure employees are educated about the advantages of disability insurance. It's important that employees are protected with help from this type of voluntary insurance, especially given the fact that 1 in 4 of today's 20-year-olds will become disabled before they reach the age of 67.1 If disabled and without income, employees may risk losing their savings, retirement funds or even their home.
Why employees need disability insurance
Disability insurance is an important tool to help employees safeguard their finances since a voluntary short-term disability insurance policy pays a monthly percentage of an employee's gross income for a set period of time while they're disabled. Employees with this type of policy can use cash benefits to help pay for daily living expenses, such as rent, mortgage payments, gas, groceries, child care or other necessities.
In turn, policyholders gain peace of mind knowing they will still have a source of income to help pay for bills while they're focused on recovering. Despite the obvious financial benefit, about 100 million workers are without private disability income insurance;[i] and while 63 percent of Americans agree that most people need disability insurance, only 29 percent say they own it.[ii]
Any employee, regardless of whether they are single or have dependents, can take advantage of voluntary disability insurance. Disability coverage can help protect employees by providing:
- Benefits that pay for both total and partial disability;
- Coverage that's sold on an individual basis; and
- Guaranteed-issue options.
Employers can benefit from disability too
Although there is a great need for disability insurance, a growing number of companies are cutting back on the amount of disability coverage they provide. A decade ago, it was commonplace for a company-paid disability plan to pay a worker 70 percent of income if they became disabled, but today employees often receive less than 40 percent due to the changing economy.[iii]
Additionally, more than 90 percent of disabling accidents and illnesses are not work-related, so they won't be covered under workers' compensation.[iv] While most people assume they will receive benefits from Social Security, this is often not the case.
According to the U.S. Social Security Administration, 68 percent of initial Social Security Disability Insurance (SSDI) claim applications were denied in March 2015;[v] and the average monthly benefit paid by Social Security's Disability Program in March 2015 was only $1,165 per month.5
Providing disability insurance can help with employee retention and recruitment. In today's job landscape, it's common for employees to look for a new job every few years. In order to keep current talent and attract new employees, it's important to offer a competitive benefits package.
According to an Aflac survey, 63 percent of employees say comprehensive benefits are increasingly important today due to:
- Rising medical costs (76 percent);
- The increasing price of medical coverage (66 percent);
- Higher deductibles and copays (61 percent); and
- Their employers reducing health care benefits and/or coverage (37 percent).[vi]
Reap the benefits of providing disability coverage
The best aspect of providing voluntary coverage is that it doesn't cost employers a dime since premiums are paid for by workers who elect to apply for coverage. By making supplemental policies available, employers can help give workers the protection they may need with no direct effect on their bottom lines.
Disability insurance is a cost-efficient way for employers to show they care about their employees' wellness as well as their financial health. Disability Insurance Awareness Month is the perfect time to make sure employees are aware of the advantages of disability coverage, and adding disability insurance to a benefits package can help make you an attractive employer for your current workforce as well as potential employees.
About the Author
Matthew Owenby has 15 years of experience in the financial services/HR industry and is Aflac's vice president of Human Resources. He is responsible for the strategy and implementation of all aspects of human resource management for Aflac's more than 4,400 employees. Visit aflac.com, call 1.888.861.0251 or send an email to firstname.lastname@example.org to learn more.
[i] Center for Disability Awareness, "Chances of Disability: Me Disabled?," accessed Apr. 13, 2015
[ii] LIMRA, "Lack of knowledge hinders disability insurance ownership," accessed Apr. 13, 2015 - http://www.limra.com/Posts/PR/Industry_Trends_Blog/Lack_of_Knowledge_Hinders_Disability_Insurance_Ownership.aspx
[iii] Aflac, "Short-Term Disability Insurance Key Component to Financial Protection," accessed on Apr. 13, 2015
[iv] CDA Council For Disability Awareness, "The 2011 Council for Disability Awareness Long-Term Disability Claims Review," accessed on Apr. 13, 2015 -
[v] The Official Website of the U.S. Social Security Administration, Disabled worker average benefits table, accessed Mar. 30, 2015 - http://www.ssa.gov/OACT/STATS/dibStat.html
[vi] 2014 Aflac WorkForces Report conducted in Jan. 2014 by Research Now on behalf of Aflac, accessed Mar. 30, 2015 - http://workforces.aflac.com/index.php