Among the many new things health care reform has brought us is the term, “young invincibles.” To some extent, we all feel young and invincible, but this particular term refers to those ages 18-34 who have chosen not to carry health insurance.
Many of us have the same attitude toward disability and disability insurance as the young invincibles do about health insurance. We don’t think anything will happen to us. According to research done by the Council for Disability Awareness, 64% of wage earners believe they have a 2% or less risk of being disabled for 3 months or more during their working career. In reality, the Social Security Administration says the odds of experiencing a disability for a worker entering the workforce today are 3 out of 10, or closer to a 30% chance.
To better understand how well-prepared you are, should you experience a loss due to an accident or illness, the Council for Disability Awareness has provided five questions every worker should ask:
- What are my “necessary” monthly living expenses that would continue if my income stopped (e.g., rent or mortgage, utilities, food, medical insurance, etc.)?
- Would my personal savings pay for my “necessary” monthly expenses—for one month, three months, 6 months, longer? Would my savings cover my “out of pocket” medical expenses (deductibles and co-pays)?
- Does my employer have a sick pay plan or long-term disability program, or both? Am I participating? When would it start, how much would it pay me and for how long?
- What other sources of income might be available to help me pay for my expenses, and for how long? My spouse, family, second mortgage, credit cards?
- Could I afford my medical COBRA premiums, and what would happen to the contributions to my 401k account?
In the absence of private disability insurance, wage earners will have to rely on the Social Security Disability Income program for assistance during a disability. According to the Social Security Administration, 65% of initial SSDI claim applications were denied in 2009. For those who received approval, the average monthly benefit paid was $1,065 per month, with over half receiving less than $1,000 per month.
There are many risk reduction strategies available to business owners and individuals who want to protect what they have, in the event that they become disabled. Of course, taking better care of one’s self is paramount. In addition, there are many options including short and long-term disability plans as well as key person income replacement, overhead expense and even a disability buy-out plan.
If you or your employees are currently not protected, we encourage you to take the time to better understand the potential risk and costs. For more information on disabilities, see www.disabilitycanhappen.org.