The Affordability of Disability
Helping employers understand the perils of dropping disability coverage
Even with the economy showing significant recovery in the past year, an air of caution lingers over employers’ heads. This is true when it comes to making decisions about increasing salaries, new hires and especially group benefit offerings. Many businesses are continuing to tighten their belts and streamline costs, primarily by discontinuing disability coverage. The stark reality, however, is that going without disability insurance can often be more costly for employers.
The Integrated Benefits Institute reports that the average disability absence costs an employer more than $35,000. If multiple employees were to become disabled at once, the cost of continuing to operate a productive business could become overwhelming. Industry statistics also show that about 59 percent of employees who have disability insurance purchased it through their employers. This is where producers can step in and help — by demonstrating that employers cannot afford to cut disability from their benefits package.
Just the facts
If you are a producer meeting with a benefits manager about disability coverage, start with the facts:
-More than 10 percent of Americans between the ages of 18 and 64 have a disability (U.S. Census Bureau)
-In the United States, a disabling injury occurs, on average, every second (National Safety Council)
-Nearly 90 percent of disabilities aren’t work-related, and therefore don’t qualify for workers’ compensation benefits (National Safety Council)
-Every 10 minutes, an average of 498 Americans become disabled (National Safety Council)
-100 million Americans are not protected by private disability insurance (Council for Disability Awareness)
-On average, every 40 seconds, one individual in the United States has a stroke. Each year, about 795,000 people have strokes; about 610,000 of these are first-time strokes (Centers for Disease Control and Prevention)
The dollar discussion
When it boils down to these hard numbers, your clients may have a hard time overlooking the need for disability coverage. But when it comes time to talk cost, an employer may ask, “How much will offering DI affect my bottom line?”
While traditional group disability plans can put more of the cost onus on the employer, the emergence of group voluntary disability has greatly alleviated this concern. It offers the best of both worlds, allowing the employer to offer an attractive and comprehensive benefits package while minimizing costs with employee-paid premiums.
By offering group voluntary disability insurance coverage, employers can include a service that can have apositive effect on their employees’ lives, which, in turn, can affect work productivity.
Building employee awareness
Once the employer understands the affordability of disability coverage, they may ask you for suggestions on how to help convince employees to take disability insurance instead of passing it by to save money.
In order to educate employees on DI as a wise and necessary investment, it is a good idea to again start with the facts. According to a 2010 survey conducted by the Council for Disability Awareness, 65 percent of respondents stated they would be able to pay bills for less than a year if their income stream was interrupted. Consider the following statistics that show how unprepared most Americans are for an interruption in income:
-Only 40 percent of adult Americans have savings earmarked for emergencies, according to the Consumer Federation of America.
-Seventy-one percent of American employees are living paycheck to paycheck, without enough savings to cushion the financial blow of a disability, according to the American Payroll Association.
-Nineteen percent of employees have disability insurance coverage levels of 50 percent or less of household income, and 74 percent of those believe it is adequate, according to MetLife’s eighth annual study of employee benefits trends.
Another way employers can demonstrate the affordability of choosing disability coverage is to show how an average employee’s costs can add up, even when they are recovering at home. Employees may respond well if an employer can share stories about others they knew, such as an employee who needed extended maternity leave yet had no DI coverage, or an employee who had a tonsillectomy and was out of work for three weeks on disability.
There is no question that, as a producer, it is of the utmost importance that you provide education for your customers and their employees. By taking a consultative approach and presenting the facts about the cost and affordability of disability coverage, you can, in turn, help employers understand and answer the question, “How can I afford not to offer disability insurance?” «
Eric M. Pete is field vice president in the Pittsburgh regional sales office of American United Life Insurance Company, a OneAmerica company.