May is Disability Awareness Month, a fact I typically overlook when writing the May column. It seems as if disability income protection is fated to be the most overlooked benefit in terms of both need and customer value. For example, in study after study where employees rank benefits in importance, disability income coverage consistently rates behind medical, prescription drug, dental, vision and life insurance.
It’s easy to see why medical coverage is virtually always ranked first, and it is also easy to understand that everyone knows they need life insurance. In each case, there are significant economic needs that would be very difficult to meet without insurance. Prescription drug coverage is also essential for those with significant needs such as chronic medical conditions. But for many of us, prescription drug coverage is good for occasional utilization – it saves us money on prescriptions that we are likely to need a handful of times a year.
Dental and vision coverage are like that as well. They are “utilization products,” helpful in meeting common bills, especially when significant work is required. And because employees ranking benefit values usually think about the benefits they use, dental and vision coverage ranks highly. The question “how do you rank your employee benefits?” takes people down a path where utilization drives importance.
Further, the reference to “disability” in the product’s name conjures up images of people who are unable to work, or those suffering from some rare conditions, as opposed to images of working people who are losing something vital (their paycheck). The key issue that opens minds to the need for disability income protection concerns loss of income. The common question is: “How long could you/your family pay your bills without a paycheck?”
And this problem is compounded by the fact that one of the major, traditional sources of emergency cash – home equity – has experienced significant erosion in the past couple of years. Finally, the average working person has difficulty visualizing disability in terms of people like themselves. If you were asked if you know anyone who is disabled, it’s more likely you will think of a blind person or someone who was involved in a bad car accident rather than a young, vibrant coworker who is unable to work due to an unexpected illness or a sports accident.
When you’re working every day, it is difficult to believe the numbers. On the one hand, disability is common. The Social Security Administration estimates that 3 in 10 people entering the U.S. workforce will be disabled before they retire. And yet, according to the Council for Disability Awareness, roughly 70 percent of the U.S. workforce is not protected by private disability insurance. It’s obvious there is an underinsured need here.
This is particularly relevant when the employer has a voluntary plan for short and/or long-term disability. What can we do about this? I have often heard it said that we should focus on educating employees about the need for disability income protection, to help encourage them to make informed decisions. But to me, educating is too passive. We need to go beyond educating here.
Given the fact that virtually no one can pay their bills without a paycheck for more than a short period of time without protection, we need to provide clear advice that cautions them not to overlook their need for income protection.
Marty Traynor is vice president of voluntary benefits at Mutual of Omaha. He can be reached at [email protected].
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