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Need for Protection
View the “true” facts about income-interrupting disabilities.
Emotional impact versus insurance protection for various events.
A disability can happen to anyone…at any time.
- In the last 10 minutes, 490 Americans became disabled.
– National Safety Council®, Injury Facts® 2010 Ed. - In 2008, there were 2.1 million disabling injuries caused by a motor vehicle accident; there were 39,000 fatal motor vehicle accidents.
– National Safety Council®, Injury Facts® 2010 Ed. - In the U.S., a disabling injury occurs every 1 second, a fatal injury occurs every 4 minutes.
– National Safety Council®, Injury Facts® 2010 Ed. - In the home a fatal injury occurs every 12 minutes and a disabling injury every 3 seconds.
– National Safety Council®, Injury Facts® 2008 Ed. - There is a death caused by a motor vehicle crash every 12 minutes; there is a disabling injury every 13 seconds.
– National Safety Council®, Injury Facts® 2008 Ed. - At age 40, the average worker faces only a 14 percent chance of dying before age 65 but a 21 percent chance of being disabled for 90 days or more.
– Insurance Information Institute, www.iii.org November, 2005 - The probability of a white-collar worker becoming disabled for 90 days or longer between the ages of 35 and 65 is 27% for men and 31% for women.
– Millman, sponsored by Life and Health Insurance Foundation for Education (LIFE), “The Real Risk of Disability in the United States”, 2007 - 43% of all people age 40 will have a long-term disability event prior to age 65.
– JHA Disability Fact Book, 2008 - 51.2 million Americans have some level of disability. They represent 18% of the population.
– U.S. Census Bureau, July, 2006 - The number of disabled workers in America has risen by 35% since 2000.
– Social Security Administration, 2007 - Almost 3 in 10 workers entering the workforce today will become disabled before retirement.
– Social Security Administration, Fact Sheet, January 31, 2007 - In 2007, the employment rate of working-age people with disabilities in the U.S. was 36.9%.
– U.S. Census Bureau, American Community Survey, 2007 - A new Harvard University report reveals that 62 percent of all personal bankruptcies filed in the U.S. in 2007 were due to an inability to pay for medical expenses.
– June 4, 2009. The American Journal of Medicine - Unfortunately, most Americans have little understanding of the likelihood of experiencing a disability. A recent CDA survey of workers found:
- 90 percent underestimate their own chances of becoming disabled.
- 85 percent express little or no concern that they might suffer a disability lasting three months or longer.
- 56 percent do not realize that the chances of becoming disabled have risen over the past five years.
– Council for Disability Awareness, 2007 Disability Awareness Survey
Retirement Protection and American Savings Patterns
Most Americans can’t afford to become disabled.
- In 2007, the median income of households that include any working-age people with disabilities in the U.S. was $38,400.
– U.S. Census Bureau, American Community Survey, 2007 - Over 70% of working Americans do not have enough savings to meet short-term emergencies.
– National Investment Watch Survey, A.G. Edwards Inc., 2004 - Over 50% of the workforce has no private pension coverage and a third have no retirement savings.
– Social Security Administration, Fact Sheet 2007 - 71% of American employees live from paycheck to paycheck.
– American Payroll Association, “Getting Paid in America” Survey, 2008 - Only 40% of adult Americans have separate emergency savings funds.
– National survey commissioned by the Consumer Federation of America (CFA) and carried out by Opinion Research Corporation, February 2007 - More than 35% of workers with 401(k) or IRA plans have not thought about or don’t know what would happen to their contributions if they were unable to earn an income for a period of time.
– Council for Disability Awareness, 2007 Disability Survey
Causes of Disability
Illnesses generally cause disabilities, not accidents.
- 90% of disabilities are caused by illnesses.
– JHA Disability Fact Book, 2008 Edition - Over 85% of disabling accidents and illnesses are not work related.
– National Safety Council®, Injury Facts® 2008 Ed. - While many people think that disabilities are typically caused by freak accidents, the majority of long-term absences are actually due to illnesses, such as cancer and heart disease.
– Life and Health Insurance Foundation for Education November, 2005 - For insured men and women in their prime working years (30-59), the medical conditions causing the most disabilities are cardiovascular problems, musculoskeletal conditions and cancer. One notable exception is the impact of pregnancy on female disability risk. Among women ages 30-39, disabilities due to pregnancy (mostly complications of pregnancy) are the most prominent claim type.
– Millman, sponsored by Life and Health Insurance Foundation for Education (LIFE), “The Real Risk of Disability in the United States”, 2007 - Stroke is a leading cause of serious long-term disability.
– Centers for Disease Control and Prevention, 2007 - Common causes of individual disability insurance claims are:
Disability Duration
An average disability may last longer than you think.
- In 2008, the majority of Principal Life’s individual disability claims had been active for 5-10 years. The effects of a disability are mostly long-term:
Duration % of Active Claims 10+ years 21.10% 5 to 10 years 30.20% 2 to 5 years 17.90% 2 years 16.20% 1 year or less 12.70% - The average duration of a long-term disability is 30 months.
– JHA Disability Fact Book, 2006 - Nearly 1 in 5 Americans will become disabled for 1 year or more before the age of 65.
– Life and Health Insurance Foundation for Education. November 2005 - Three out of 10 workers between the ages of 25 and 65 will experience an accident or illness that keeps them out of work for 3 months or longer.
– Social Security Administration, Fact Sheet, January 31, 2007 - Nearly 1 in 3 Americans ages 35-65 will become disabled for more than 90 days
– 2005 Field Guide to Estate Planning, Business Planning & Employee Benefits, by Donald Cady
Disability Costs
Indirect and direct costs of a disability take financial tolls on everyone.
- One work-related disabling injury costs an employer on average $48,000.
– National Safety Council®, Injury Facts® 2010 Ed
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- Off-the-job injuries to workers cost the nation at least $253.3 billion and 225 million days of production time in 2008.
– National Safety Council®, Injury Facts® 2010 Ed. - The average disability absence results in payments of $3,800, while lost productivity costs on average over $22,800.
– Integrated Benefits Institute, IBI News September 8th, 2006 - Employers spend 4.1% of payroll on unscheduled absences.
– Marsh/Mercer Health & Benefits, “Health, Productivity and Absence Management Programs,” 2006 Survey report - In 2006, unscheduled absence cost some large employers an estimated $850,000 per year in direct payroll.
– CCH and Harris Interactive, “2006 CCH Unscheduled Absence Survey,” October 2006 - Disabling injuries and illnesses account for 55% of employee absences.
– JHA 2005 Absence Management Survey, “Big-picture benefits: Integrating FMLA and disability claims data helps reduce absenteeism,” by Chris Silva, September 2006 - Just 10% of disability cases account for more than half the total medical and disability costs.
– Integrated Benefits Institute, IBI News September 8th, 2008
Misconceptions
Common back-up plans to loss of income may not be an option.
- Nearly three-fourths of disabling injuries in 2008 are not work related, and therefore not covered by workers’ compensation.
– National Safety Council®, Injury Facts® 2010 Ed. - Less than half – 35% – of the 2.8 million workers who applied for Social Security Disability Insurance (SSDI) benefits in 2009 were approved.
– Social Security Online, disabled worker beneficiary statistics, ssa.gov - The average monthly SSDI benefit is $1,064.
– Social Security Administration, Monthly Statistical Snapshot, December 2009, ssa.gov - Comparison of Social Security disability insurance applications to the amount approved:
- In 2007, the percentage of working-age people with disabilities receiving SSDI payments in the US was 17.1%.
– U.S. Census Bureau, American Community Survey, 2007 - Over 6.8 million workers are receiving SSDI benefits, almost half are under age 50. This represents only 13% of the over 51 million Americans classified as disabled.
– Social Security Administration, Fact Sheet 2007
Market Opportunity
There is a need for disability insurance.
- Workers’ rankings of the most valuable activities to achieve long-term financial security:
- 43% of employees indicated protecting financial assets due to an unexpected event as a main concern.
– The Principal Financial Well-Being IndexSM, 2009 - 61% of employees surveyed said good employee benefits encourage them to work harder and perform better; 61% said good benefits keep them working for their current employer.
– The Principal Financial Well-Being IndexSM, 2010 - Fewer than one in three (29%) U.S. workers have private long-term disability coverage.
– National Compensation Survey, Bureau of Labor Statistics, 2006 - 70% of the private sector workforce has no long-term disability insurance. – Social Security Administration, Fact Sheet 2007
- Only 30% of American workers in private industry currently have access to employer-sponsored long-term disability insurance coverage.
– National Compensation Survey: Employee Benefits in Private Industry in the United States, U.S. Department of Labor, Bureau of Labor Statistics, March 2006. - The odds of selling a product to a new customer are 15 percent, while the odds of selling to an existing customer are 50 percent.
– Raymond Adamson, Cross-Sell to Success, Advisor Today, March 2005 - The top reason producers are not selling IDI is because their clients do not ask about the product.
– LIMRA International, “Producer Perspectives on Individual Disability Insurance”, 2009 - Despite the fact that more than 70% of American households rely on two incomes to make ends meet, only 26% of Americans have any type of disability insurance.
– Facts from LIMRA May 2010 Multimedia Fact Sheet, based on findings from LIMRA’s life insurance consumer studies. - Only 18% of consumers recall being approached about buying disability insurance – less than half as many as those being approached for life insurance.
– Facts from LIMRA May 2010 Multimedia Fact Sheet, based on findings from LIMRA’s life insurance consumer studies. - Only 13% of small business owners have disability income insurance.
– Facts from LIMRA May 2010 Multimedia Fact Sheet, based on findings from LIMRA’s life insurance consumer studies. - Who buys disability insurance? While men represent the majority of new sales, sales to females grew at a slightly faster rate than sales to males in 2008. Older age groups bought more policies in 2008, with an increase in both the 50-59 and 60+ age groups.
– Facts from LIMRA May 2010 Multimedia Fact Sheet, based on findings from LIMRA’s life insurance consumer studies.
Education Related
There is a clear need for more information and education about solutions that are available to help during a disability.
- From the CDA 2009 Worker Disability Planning and Preparedness Study:
- Only one in three workers surveyed associate financial planning with protecting assets and income (38%), tax planning (33%), or saving for a home purchase (32%).
- Nearly nine in ten workers surveyed believe that people should plan in their 20s or 30s in case an income limiting disability should occur (86%). Only half of all workers have actually planned for this possibility (50%), and only half have even discussed disability planning (46%).
- When surveyed what is most valuable in helping them achieve long-term financial security, far more workers rank their ability to earn a living as number one (53%) than assets such as retirement savings (17%), other savings and investments (12%), their home (12%), medical insurance (5%), or personal possessions (1%).
- The large majority of workers are concerned about how they would pay their living expenses if they were disabled (82%), yet most are not prepared if such a disability were to extend for any significant length of time. Seven in ten could cover their expenses for six months or less.
- 66% of executives surveyed believe that providing financial advice at the workplace is more important than it was a year ago.
– Charles Schwab & Co. June 2009 - 76% of employed baby boomers and 68% of employed Generation Y workers say that the employer is among the most reliable sources of information about benefits.
– Harris Interactive Survey 2008 - Only 5% of baby boomers realize they have a 34% chance of becoming disabled during their working years.
– Harris Interactive/AHIP, Baby Boomers’ Awareness of Disability Risks, February 2008 - 45% of employees feel not at all knowledgeable about individually owned disability insurance.
– Principal Well-Being Index, 1QTR 2009 - 14% of employees personally own a disability income insurance policy on themselves, a significant decrease from 1st quarter 2008 when 18% reported owning such a policy. Only 7% of employees’ spouses own a disability income insurance policy.
– Principal Well-Being Index, 1QTR 2009
Business Related
There is a need for disability insurance solutions for businesses.
- The U.S. had 5.8 million small business employers in 2009, representing over 99 percent of the nation’s employers.
– Small Business Administration Office of Advocacy, 2010 - In 2009, outstanding small business loans (under $1 million) were valued at over $685.4 billion for more than 23 million loans.
– Small Business Administration Office of Advocacy, 2010 - Half of business owners do not have any disability plans in place for either themselves or their key employees (50%).
– The Principal Financial Group Business Priorities Market Research, January 2009 - Nearly three quarters of business owners indicated that they or their key employees are limited in the amount they are allowed to contribute to their qualified retirement plan (73%). Yet, very few business owners offer supplemental retirement plans (83% do not offer any plans) that can help overcome this limitation.
– The Principal Financial Group Business Priorities Market Research, January 2009 - About 43% of wealthy business owners (almost double the percentage of other affluent Americans questioned) said they would work to age 70 or later, but only one-third of these owners said they have written succession plans in place.
– Private Wealth magazine, April-May 2008; survey by PNC Wealth Management, Philadelphia, PA