The mantra “a penny saved is a penny
earned” certainly does not apply to
disability insurance. This underutilized employee benefit provides far more
than just a paycheck for employees who
can’t work due to illness or injury.
Surprisingly, only a small percentage of
employers offer paid or voluntary disability programs for their employees, despite
statistics that show nearly half of all personal bankruptcies are the direct result of
a major illness or injury.
“Disability insurance is not as visible or as
important to employers and employees as
health insurance or dental insurance,” says
Tina Antram, vice president, Hilb Rogal &
Hobbs, Tampa. “They believe other things
are going to protect them in the event they
are disabled, and they are wrong.”
Smart Business recently spoke with
Antram and Dawn Bowers-Card, Employee Benefits Practice leader, Hilb Rogal
& Hobbs, Sarasota, about why disability
insurance is an important but often
untapped safety net that can help control
costs and foster employee loyalty.
Why is disability insurance an important
issue?
Antram: While many people think that
injury is the leading cause of disability, the
reality is it is illness. That fact is made more
prevalent by two significant demographic
factors: obesity and aging.
According to the Society of Actuaries, a
35-year-old person has a 50 percent chance
of being unable to work for more than three
months before the age of 65. In addition, the
National Safety Council reported in 2004
that two-thirds of disabling injuries suffered
by workers in 2003 occurred off the job.
Bowers-Card: Today’s advanced medical
treatment promotes survival — which
increases the incidence of disability versus
death. Think about cancer, heart attack or
stroke; what used to kill us now disables us.
Financially, statistics show that people
are not prepared to deal with a disability
and the loss of income associated with it.
According to an article in Health Affairs,
46 percent of bankruptcies in 2001 were
caused by a major medical illness or injury.
Meanwhile, 53 percent to 79 percent of
Americans live paycheck to paycheck and
when coupled with the statistic that nearly
one in three Americans will suffer a serious
disability between ages 35 and 65, it becomes a staggering financial scenario.
These facts clearly support the need for disability insurance, but the issue is overcoming resistance. Most people think they don’t
need it and believe ‘it won’t happen to me.’
What makes disability insurance a good
value for employees?
Antram: The cost is inexpensive compared to the value. According to a 2005
JHA market survey, the average cost for
short-term disability was $192 per year and
$228 per year for long-term disability coverage. These are averages and many variables apply in determining the actual cost
of an individual’s coverage. However, it
illustrates the relatively inexpensive nature
of this type of insurance.
Bowers-Card: If an employer sponsors a
group disability plan — paid for either by
the company or by the employee — it is
advantageous for the employee to purchase
that policy. The employer-sponsored plan
will offer group pricing and will not require
evidence of good health or income verification. Individual policies are available but
can be quite expensive and a person must
be in excellent health and financially sound
when applying for coverage to qualify.
The rising cost of health care puts pressure on ancillary lines of coverage like disability when employers decide what coverage to offer in their programs. There are
not many people in the work force that
could describe their income as ancillary
and disability can be offered on a voluntary
employee-pay-all basis. People tend to
think they will fall back on Social Security
Disability (SSDI) if they become disabled.
The reality is that it is very hard to qualify
for SSDI due to long elimination periods
and a very strict definition for disability.
Why is disability insurance a good value for
employers?
Antram: It can help attract and retain
good employees — even serve as a reward
to long-term employees. It also demonstrates an employer’s concern about their
employees’ well-being and financial security, which increases employee loyalty and
has a positive impact on morale. In today’s
tight labor market, this impact is something employers should not underestimate.
In addition, when someone is disabled,
they generally want to return to work.
Disability insurance has provisions and
incentives, for both the employer and
employee, to help them return to work. This
can be a financial savings to the employer in
the indirect costs related to disability that
are estimated to be 8 percent of payroll.
Bowers-Card: It can also assist with presenteeism issues (when an employee is at
work but unable to work at full capacity
due to physical impairment or mental distraction) and the marginally disabled. With
the security of a disability benefit, employees feel that they can take time off of work
for treatment or rehabilitation and when
they return they will be more productive.
Disability coverage may also potentially
lower the incidence of some workers’ compensation claims because employees have
appropriate coverage for off the job
injuries resulting in their inability to work.
TINA ANTRAM, GBDS, is vice president, Hilb Rogal & Hobbs,
Tampa. Reach her at (813) 261-7979 or [email protected].
DAWN BOWERS-CARD, GBDS, is Employee Benefits Practice
leader, Hilb Rogal & Hobbs, Sarasota. Reach her at (941) 554-3130 or [email protected].
Practice leader
Hilb Rogal & Hobbs, Sarasota
