As the economy improves, brokers and employers are doing more to expand benefit offerings to workers who are now less concerned about job security and more concerned about job benefits. One type of benefit that has seen recent growth is disability insurance, which experts say provides a valuable protection for workers at a relatively low cost. ≥≥

“There's been a resurgence in disability insurance sales,” says Kathy Plummer, director of product and market development with the disability and life insurance company Unum. “It was very slow before the recession. But I think we're going to see increases in coverage.”

Industry experts say in recent years, a couple of factors have worked to dull interest in benefits such as disability insurance. For one, the recession had many companies focused on cost cutting. Benefits outside medical insurance were often placed at a lower priority. As the recession faded, employers were then hit with the implementation of the Affordable Care Act (ACA). Understanding those changes and complying with new regulations have been a top focus of employers and HR departments.

But now the environment is changing again. The ACA is more established and better understood. Demand for skilled workers has driven companies to provide a wider selection of benefits in order to attract and retain workers. Under these new circumstances, disability insurance is getting a second look by many brokers and employers.

Income protection

Disability insurance offers a very basic protection: Workers can ensure that they continue to have income even if they are unable to work due to injury.

“Your income and ability to work are your most valuable assets, no matter what career phase you are in,” says Larry Schneider, founder of the Disability Insurance Resource Center, who has worked as a broker in the field since 1972. “Protecting your income is the cornerstone to all financial planning.”

Unlike disability insurance offered by the government through Social Security—which has approximately a 70 percent initial rejection rate—many employer-based disability benefit programs offer a guaranteed benefit to workers who purchase the insurance, with either their own dollars or with the help of their employer.

Common Misconceptions

There are certain misconceptions about the need for disability insurance. For one, the chances of a worker needing it are far greater than many think: About 1 in 4 workers will become disabled for some period of time before they reach the age of 67, according to government figures.

Many employees assume workers' compensation plans will cover them if they become injured, but they may forget that only a small fraction of injuries occur on the job. Workers' comp does not provide protection for injuries outside of work. And stereotypes about disabling injuries happening mostly to male workers and older workers have also proven to be inaccurate.

Although not all employees are well-educated on the benefit, many are interested in it. In the latest Metlife Employee Benefits Trends Study, just over 40 percent of workers said that disability insurance is a “must have” benefit. That put disability insurance in the top 10 most important benefits, of the 17 that the study tracked.

A growing range of options

With “voluntary benefits” becoming a buzz phrase in the HR world, it's no surprise that disability insurance is often one of the benefits that employers make available for workers to purchase.

Plummer said many large companies offer group disability plans—both short-term and long-term—to employees, but the range of employer contribution and benefit options can vary widely. In addition, some companies feel they can only afford to offer the benefit to certain segments of their workforce.

With the growth of voluntary benefits, the choices are expanding, allowing smaller companies to add the benefit to their menu of options, and allowing larger companies to give employees more choices.

“We're seeing a lot more voluntary plans now,” says Plummer. “It goes along with how companies are looking at employee benefits in general. There's the idea that we can't provide enough flexibility in plan design, from the employers perspective, so it's great to offer a voluntary plan where the employee can pick and choose the level of benefit that's right for them.”

Plummer adds that this fits with a general trend of consumers being more involved in making decisions about their health insurance and retirement plans.

“As employees, we're all taking on more responsibility, so this kind of goes along with the idea of giving employees more choices,” she says. “But we still like employer-paid plans. Those are great plans, and group disability in general is a very affordable benefit.”

More education is needed

Schneider says now that the ACA has had a few years of implementation, brokers are beginning to spend more time with benefits such as disability insurance.

“The ACA has taken up a lot of time, energy and resources with brokers. They had a lot on their plate,” he says. “To a certain extent, they were treading water and staying out of trouble, so to speak, focusing on those things rather than disability insurance.”

Now, Schneider adds, is a good time for the insurance industry to engage in some serious education about disability insurance, both for consumers and brokers. He says there are still a lot of misconceptions out there about disability insurance. “All insurance creates confusion—that's a given,” he says. “The industry has done a good job trying to educate the agents, but they should go much further, in my opinion. Knowledge is power. If you don't have knowledge, you're going to be reluctant to sell the stuff.”

Plummer agrees that more education is needed, but adds that brokers should start the conversation with employers sooner, rather than later. “I think for employers and brokers, this is a great time to be looking at this,” she says. “It should be a question that every broker is asking employers—do you provide disability insurance to your employees? Do they all have access to it, either through an employer-paid plan or a voluntary plan? If you have working employees, you need to help them get access, to find something that's going to help them protect their income.”