Why Disability Insurance Is So Important

When you have a disability of any type, your time,you need it.
energy, and emotions are all heightened as you beginNow, you know how much your STD and LTD will
the journey to learn all you can so that you canpay out each month. The question is, how much
regain the best quality of life that you can, givenSHOULD YOU HAVE?
your particular circumstances. And, if you are married,There are some simple ways to determine just how
and/or if you have children, trying to communicatemuch is "enough", and it varies for each family.
with them what is going on with you, as well as to1) Sick leave - maintain at minimum 5 days, and, at
your doctors, becomes a difficult chore also.best, 10 days. In this way, you will be able to meet a
With all of this chaos in your life, the absolute lastusual time gap before your STD kicks in.
thing that you need to worry about is money! What2) STD - most STD policies cover up to 26 weeks.
if I can't work any longer? How will the bills be paid?To make sure that you have "enough" STD TIME
Perhaps you are saying that you do not need anycoverage, the weeks should cover your LTD's
disability insurance. Consider the following.elimination period.
Disability Statistics[1] The odds of a person having at3) LTD - timewise, you will want your LTD plan to
least one long term disability (LTD) that lasts threecover you until your retirement age. (Note, not all
months or longer before that person reaches age 65.retirement ages are at 65. The retirement ages are
DISABLED: (1999) According to the Disabilityincreasing; make sure that you know your specific
Management Sourcebook, the number of folksretirement age.)
between 17 and 44 with severe disabilities hasNow, let's talk about money. To calculate how much
increased 400 percent over the past 25 years. One inmoney is needed by you and your family, consider
seven people will become disabled for five years orthe following.
more before they reach 65. ODDS, STATISTICSFor each month, note the following.
AND DISABILITIES: (1999) The chances of using1) OUTGO Your "must pay" expenses (including, but
your homeowners insurance are about 1 in 88. Thenot limited to the following: house payment; utilities;
odds of using your auto insurance at about 1 in 47.car and gasoline; medical expenses; any child care;
The chances of using your LTC insurance is about 2any loans, credit cards, etc.)
in 5. One out of two women and one out of three2) INCOME ON DISABILITY Add together any
men will spend some time in a nursing home. (Journalincome other than yours (i.e., spouse's income) plus
of the American Society of CLU, 1996) More than 12whatever you will receive on a monthly basis from
million older Americans will require some form of longyour company-paid STD and/or LTD. Add to this
term care by 2020. (Health Insurance Association ofamount whatever savings you have, and how long
America). 72% of residents in a nursing home arethis would last.
women 90% of nursing home residents are over theThe gap between income on disability and outgo
age of 65. 22% of the disabled population is underwould be the amount of income that you might want
age 65. (Puget Sound Life Underwriters Journal 1996).to offset with a private LTD policy.
Functionally disabled people between the ages of 18WHY THE NEED FOR DISABILITY INSURANCE
and 64 represent 40% of Americans needing longBENEFITS? What are the odds?: (2005) in the next
term care services. (Life Insurance Selling 1995)hour 194 people will be injured in car accidents, 57
The likelihood of needing LTC (obviously) increaseshomes will catch fire, 230 people will die, and 1,027
with age. In 1991, 29.2% if those age 45- 64 had awill become disabled.
disability; 44.6% between 65 and 74 had a disability;Here are the latest disability trends that concern you.
63.7% between the ages of 75 to 84. 15.3% andØ Today, we live harder, work harder and play
41.5% respectively had a severe disability. (Employeeharder than ever before. As a consequence, there
Benefit Research Institute, 1995) 80% of disabledhas been a dramatic increase in disabling injuries and
persons are cared for at home or in adult day careillnesses. Ø In the past 25 years, the number of
centers. 72% of caregivers are family or friends.severely disabled people ages 17 to 44 has increased
(Puget Sound Underwriters Journal). The cost of400 percent. While the number of people with
home care can run from $4.25 to over $200 dailyprotection has also increased, most Americans still
depending on the level of skill needed (SF Chronicle,have a disability income protection gap. Ø This is
1995). Caring for each Alzheimers patient will costalarming when you consider in a year's time, chances
more than $213,000- on top of other medicalare only one in 1,200 of you will need your fire
expenses- over the remaining five years of theirinsurance-generally considered a necessity for
lives. (American Journal of Public Health, 1994). Overhomeowners-but one in eight (8) of you will be sick,
99% of nursing home care is either custodial orinjured or killed. Ø The risk of becoming disabled
intermediate care, not skilled care, and is not coveredwill continue to increase.
by Medicare or Medicare supplements (Journal of theAging is a main factor. Ø Because of advanced
American Society of CLU's, 1996).trauma and cancer care, more people today survive
Reasons People Take STD and LTD Leading the listillnesses and injuries that were deadly 20 years ago.
of Top 5 causes of short-term disability (STD)In 1930, the average U.S. life expectancy was 61;
workplace absence for 2001 was pregnancy (normal),today, it is 76; and by the year 2050, it will be 82.
followed by complications from pregnancy, injuriesToday, there are 3.6 million Americans over age 65;
(excluding back), back conditions and digestiveby 2040, there will be 13.8 million. Ø With
intestinal conditions. The causes of claims and theAmericans now living longer, age has and will continue
percentage received for each cause were as follows:to have a profound impact on disabilities. According
LTD - 13 percent - Cancer, 12 percent - Complicationsto the National Association of Health Underwriters,
from Pregnancy, 11 percent - Back, 9 percent -there are 3.74 disabilities per 1,000 people ages 45 to
Cardiovascular, 5 percent - Depression (2003) every49. This increases nearly five times more with age,
year 12% of the adult U.S. population suffers ato 15.18 disabilities per 1,000 people ages 60 to 64.
long-term disability. One out of every seven workersØ In addition, the traditional retirement age is
will suffer a five-year or longer period of disabilitymoving up, and more people are likely to work
before age 65, and if you're 35 now, your chancespart-time after retirement, thus increasing the risk of
of experiencing a three-month or longer disabilitya disability later in their life.
before you reach age 65 are 50%. If you're 45, theChanging workforce Ø More than 10.5 million
figure is 44% STD - 20 percent - Pregnancypeople are starting their own businesses, consulting or
(Normal), 9 percent - Pregnancy (Complications), 9working at home, according to the Bureau of Labor
percent - Injuries (Excluding Back), 8 percent - Back,Statistics. And more women than ever are now
8 percent - Digestive/Intestinalworking; many families today rely on two incomes. In
The primary sources of disability insurance are STDthe early 1900s, there were only 500,000 married
and LTD. It is important to see if your companywomen in the labor force. They represented just 4.5
offers these insurances. If they do, make sure thatpercent of all married women. Today, there are
you are covered. If they don't, you can get personalabout 39 million married women working outside the
STD and LTD. By visiting the following website, youhome (representing 60 percent of all married
can get more information about disability insurances.women), and 17 million of them have children under
How Much Disability Insurance is "Enough"? Researchage six. Ø With more women working and
shows the following about employer-offered STDfamilies relying on two incomes, the need for disability
(short term disability) and LTD (long term disability).protection has become greater, especially since
Disability Insurance: ( 2003) In small private firms,women are twice as likely to suffer a disabling illness
fewer than one-quarter of workers have short-termthan men. And with more people working out of their
disability coverage (22%), and just 13 percent havehomes and earning substantial incomes, the need for
long-term disability income insurance, according to themore flexible, individualized protection is on the rise.
Bureau of Labor Statistics.Increase in workplace disabilities Ø Over the
Half of workers at large employers (100 or moreyears, the causes of disabilities have changed in the
employees) have short-term disability incomeworkplace. Ø Today, disabilities due to
insurance (47%), and more than one-third havepsychiatric conditions, severe back pains, Carpal
long-term disability coverage (40%).Tunnel Syndrome, muscle/tissue disorders and
Disability coverage (American Council of InsurersChronic Fatigue Syndrome are increasing dramatically.
2004) 82% of employees are lacking in adequateAmong the most common long-term disabilities
coverage.(those lasting longer than three years) are circulatory
The Society of Actuaries says that only 2.5% ofand heart conditions, back disorders, psychiatric
employees have individual disability coverage (i.e., paidconditions, general sickness and subjective pain.
for by the employee and not the company).Ø Common short-term disabilities (those lasting
If you have already read the other blogs aboutless than three years) include normal pregnancies as
Disability insurance, you know how important it is towell as pregnancies with complications, injuries,
know about what types of insurance you have, andmuscular or skeletal problems, and psychiatric or
how much each insurance will pay out, if and whensubstance abuse problems.