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Clearing Up Prospects Confusion

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Group disability insurance is rarely the first benefit that employers ask for when creating an employee benefits plan. Many employers have misconceptions about disability insurance and need education about the value of the coverage.

Here are 3 common misconceptions about group disability insurance and how producers can overcome those misconceptions.

Misconception No. 1: My employees have good medical coverage. They don’t need disability insurance.

While a good medical plan is important, it does not help employees or their families deal with the entire financial impact of an illness. If employees are unable to work while ill, medical insurance will cover all or a portion of their medical bills. But employees may not have any of the normal income that they depend upon to meet monthly financial obligations such as mortgage, car and insurance payments.

Disability insurance can be a lifeline in these situations since it replaces a portion of employees’ weekly or monthly income, typically 60% or more, to help them maintain their lifestyle while they are unable to work due to a covered illness, injury or pregnancy.

Misconception No. 2: Disabilities aren’t very common and probably won’t affect my employees.

Disabilities are more common than many people think. Consider these statistics:

o Disabilities affect one-fifth of Americans–over 49 million people.

o Over 21 million Americans have a condition limiting basic physical activities, such as walking, climbing stairs, reaching, lifting or carrying.

o On average, about 2,329 disabling injuries occur every hour during the year. (National Safety Council, 2003 Injury Facts.)

o At age 35, a person has a 50% chance of being unable to work for more than 3 months due to a disability before age 65. (Society of Actuaries, as referenced in Money magazine, April 2000.)

Employers may not realize that group disability insurance policies don’t just provide income replacement for injuries or illnesses but also for common events such as pregnancies. When they consider the likelihood that their valued employees may become disabled during their working years, employers will be more inclined to consider adding a group disability policy to their employee benefits plan.

Misconception No. 3: Disability insurance is too expensive.

Producers need to arm themselves with the facts. Group disability insurance premiums are quite low. Yet disability insurance can provide much needed income for employees at a critical time in their lives.

According to LIMRA International, Windsor, Conn., the premium per certificate for new sales of long-term disability insurance averaged $207 in 2004. For short-term disability insurance, the average was $184. Compared to the thousands of dollars in premiums that employers typically pay per employee for medical insurance premiums, disability insurance can provide a considerable benefit for a low cost.

Equipped with the information they need to dispel employers’ misconceptions about disability insurance, producers can initiate conversations with their clients about adding STD or LTD coverage to their employee benefits plans.

Jane Hood is vice president of marketing in the employee benefits division at Standard Insurance Company, Portland, Ore. She can be reached at [email protected].


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