Many Americans Not Prepared for Disability’s Financial Impact |
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Written by U.S. Insurance News
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Friday, 02 March 2007 |
Americans have a slightly unrealistic view of the likelihood of becoming disabled at some point in their lives. Worse, they might be unprepared to deal with the financial impact a disability would bring.
Americans have a slightly unrealistic view of the likelihood of becoming disabled at some point in their lives. Worse, they might be unprepared to deal with the financial impact a disability would bring.
According to a survey from the National Association of Insurance Commissioners (NAIC), conducted by International Communications Research, just 13 percent of American adults say it is somewhat or very likely that they will become disabled and thus unable to work. But the Social Security Administration says its data indicates that 20 percent of the American population will become disabled and unable to work for a year or more before they reach age 65.
Americans’ optimism about the likelihood of disability contrasts with their view of how a disability would affect them financially. The NAIC survey revealed that 56 percent of U.S. adults say they would not be able to pay their bills and meet other expenses if a disability prevented them from working at least a year.
Of course, a long-term disability insurance policy would protect Americans against such a situation, but the survey also found that just 44 percent of those polled have that type of coverage. Of these, 71 percent said their long-term disability policy was provided by their employer, meaning that it’s possible they could lose the coverage if they lose or switch jobs.
“Many people don’t think about the impact becoming disabled can have on their ability to earn a living and remain financially independent,” said Walter Bell, NAIC president and Alabama Insurance Commissioner. “Understanding the role of disability insurance at each life stage is critically important to one’s total financial security.”
To help educate Americans about the important protection disability insurance provides, the NAIC provides information about this type of coverage on Insure U (www.InsureUonline.org), its education Web site. Here, consumers can learn the difference between short-term and long-term disability coverage and key provisions of both. For instance, long-term disability policies often don’t start paying out benefits until at least 90 days have passed from the onset of the disability. In addition, a typical policy provides only about 60 percent of the consumer’s previous income.
The site also lists the special considerations various demographics—such as young singles and empty nesters—have in regards to disability coverage.
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