ABOUT FOUR IN TEN FULL-TIME WORKERS UNPROTECTED BY DISABILITY INSURANCE; SINGLES AND YOUNG FAMILIES MAY BE ESPECIALLY VULNERABLE
NEW YORK, May 05, 2008
When asked to list their assets, many people are likely to fail to include their ability to earn an income. However, when that ability is impaired because of a disability, some are left financially unprotected. In fact, only 58% of full-time employees say they have disability income insurance protection, according to the 6th annual MetLife Study of Employee Benefits Trends. Nearly half of those, 41%, admit they don’t know how much protection they have. The majority of working Americans (59%) have taken no steps to determine their households’ needs with regard to disability coverage. For single people – who likely have only their own income to rely on – and young families – the majority of whom (59%) admit to living paycheck to paycheck – the loss of steady income can be especially devastating.
In the event that an individual becomes unable to work because of sickness or injury, disability income insurance can replace a portion of lost income, helping to ensure that day-to-day living expenses are covered and that long-term financial goals can be addressed. MetLife offers tips to make it easier for consumers to assess their financial needs and obtain appropriate levels of disability insurance coverage.
"Unfortunately, people tend to grossly underestimate the likelihood of becoming disabled. The workplace can be a starting point for building a strong financial safety net, and it is important for American workers to understand the disability coverage, if any, that they have through their employer, and take steps to supplement it if it’s not adequate for their needs or not available," says Michael Fradkin, vice president, MetLife Group Disability.
Lynn McDonough, vice president, MetLife Individual Disability Income adds, "It really only takes three simple questions to help people put the importance of disability income insurance in perspective: If you’re out of work because of a sickness or injury how will your bills continue to be paid? Do you have ‘rainy day’ emergency funds? If so, how long would that money last? These answers are an important first step to determining your financial protection needs."
When obtaining coverage:
- If your employer provides a group disability insurance plan, determine the percentage of income it covers, what the waiting period is before benefits begin and the length of time that you’d be covered.
- Is the amount of coverage provided by your employer enough for your situation? For example, group disability insurance offered by an employer as an employee benefit typically will not cover additional sources of income such as bonuses or incentive compensation. If your employer offers the opportunity to purchase additional coverage to meet your needs, there are advantages to buying disability insurance through the workplace including the convenience, group rates, limited underwriting and payroll deductions.
- If you don’t have coverage through work or are not able to obtain enough, you should consider purchasing an individual disability income policy.
- Look to replace 70 to 75 percent of your net earnings. Many people – especially high-wage earners – will need an individual policy to maximize their income replacement percentage.
- If your group long-term disability plan is employer-paid, then 100% of the benefit will be taxable. Individual coverage is typically paid for with after-tax dollars, so these benefits are generally income tax-free.
- Most long-term disability plans have a waiting period before benefits are paid. When purchasing an individual policy, the length of your waiting period should be determined by asking yourself, "How long can I go without a paycheck?" The longer the waiting period, the lower the premium.
- Be sure to understand the maximum duration that benefits will be paid. The most frequently offered benefit periods are two years, five years and to age 65.
For additional disability insurance resources, visit the MetLife Disability Insurance Calculator at www.metlifeiseasier.com/disabilitycalculator, read MetLife’s Disability Income Insurance Life Advice® brochure at www.lifeadvice.com or contact a MetLife agent or broker. For more information on the growing instances of disability and its financial consequences, visit the Council for Disability Awareness Web site at www.disabilitycanhappen.org.
Celebrating 140 years, MetLife, Inc. is a leading provider of insurance and financial services with operations throughout the United States and the Latin America, Europe and Asia Pacific regions. Through its domestic and international subsidiaries and affiliates, MetLife, Inc. reaches more than 70 million customers around the world and MetLife is the largest life insurer in the United States (based on life insurance in-force). The MetLife companies offer life insurance, annuities, auto and home insurance, retail banking and other financial services to individuals, as well as group insurance, reinsurance and retirement & savings products and services to corporations and other institutions. For more information, please visit www.metlife.com.
Disabling accidents or illnesses can happen to anyone:
- Three in 10 workers entering the work force today will become disabled before retiring. (Social Security Administration, Fact Sheet 2007)
Employees do not have sufficient disability insurance coverage should they become injured or ill. According to the 6th annual MetLife Study of Employee Benefits Trends:
- Only 58% of full-time employees have disability insurance coverage.
- Of those that have coverage, 41% do not know how much coverage they have.
- Of those that do know how much coverage they have, more than half – 57% – don’t believe, or are unsure, that this amount of coverage is adequate.
Employees are not financially prepared to deal with an absence from work due to a disabling illness or injury. According to the 6th annual MetLife Study of Employee Benefits Trends:
- 44% of employees say they live paycheck to paycheck. This number increases to 59% for young families (those with children under the age of six).
- 65% of full-time employees are very concerned about their families’ financial security in the event that the principal wage earner is no longer able to work due to a disability or serious illness. This climbs to 73% for full-time employees with children under the age of 18.
- 67% of full-time employees are very concerned about having enough money to pay bills during a period of sudden income loss.
Disabilities are primarily caused by illnesses, not injuries:
- According to MetLife’s disability claims data base, only about 12% of disability claims are due to accidents – the vast majority are due to illnesses.