Despite job-security worries stemming from current economic conditions, it appears that U.S. employees are just as concerned about the possibility of losing their ability to earn an income due to an unexpected illness or injury, according to a recent survey from Berkshire Life Insurance Company of America (Berkshire), a wholly-owned stock subsidiary of The Guardian Life Insurance Company of America (Guardian), New York.
In a sign that consumer fears about disability (its likelihood and impact on one’s standard of living) are top of mind, 28% of employees are extremely or very concerned about losing their income within the next 6 to 12 months because an accident or illness would make them unable to work. In comparison, a nearly equal number (25%) are concerned about losing their jobs within the next 6 to 12 months due to economic conditions.
Other findings revealed in the study, Insurance & Behavior: Life Without Income:
- African-Americans are more than twice as likely as Caucasians to be concerned about the potential of losing their income due to accident or illness over the next 12 months (50% vs. 24%).
- African-Americans are nearly three times as likely as Caucasians to be concerned about potential loss of income due to economic conditions (52% vs. 19%).
- The level of Hispanic-Americans’ anxiety was similar to white Americans with regard to loss of income due to disability and fell in between that of black and white Americans in relation to job loss: 27% of Hispanic respondents indicated they were extremely or very concerned about loss of income due to disability, while 31% felt the same about the prospect of economy-related job loss.
- Single workers are more likely than their married counterparts to worry about the financial effects of job loss: 35% of unmarried respondents said they were extremely or very concerned about losing their income due to disability over the next 12 months, versus 23% of married employees. As for economy-related job loss, 32% of singles expressed similarly high levels of concern, versus 20% of married workers.
“Regardless of their marital status or ethnicity, employees are clearly concerned about their income security,” said Larry Hazzard, Berkshire’s Senior Vice President, Product & Marketing. “They understand that their quality of life depends on it. And, while most employees have access to unemployment insurance if their job is downsized, are they adequately protected if they can’t work because of a stroke, cancer, heart attack or back injury?”
The study also revealed that 41% of employees with 401(k) or 403(b) accounts said that they would be willing to borrow from their retirement funds to cover lost income.
While this may seem like an easy solution, it comes with its own set of risks, Hazzard noted. “Taking money from your retirement accounts before you retire is like robbing yourself to pay yourself. It’s generally not a good idea to stop contributions to your retirement accounts because you lose out on compound interest and your employer match too. If you have the right disability protection in place then you won’t have to worry about liquidating or discontinuing your retirement savings because of a debilitating injury or illness.”
Offered by a few insurers, including Berkshire
(http://berkshirelife.com/personal_di/retirement_protection_plus.htm), retirement income protection insurance enables employees and business owners to continue making contributions to retirement accounts if they are unable to work due to injury or illness.
Mortgages and Retirement at Risk– It Isn’t Just a Sub-Prime/Economy Issue
If employees lost 6 or 12 months of income, which financial obligations do they feel would be most at risk?
- 55% said their retirement contributions after 12 months/ 48% after 6 months
- 48% said their mortgage payments after 12 months/ 39% after 6 months
- 43% said their credit card payments after 12 months/ 37% after 6 months
- 36% said car payments after 12 months/ 30% after 6 months
- 29% said college contributions or college loan payments after 12 months/ 25% after 6 months
“The sub-prime mortgage crisis placed a spotlight on how a spike in mortgage rates put American families in financial peril,” noted Hazzard. “Going without group or individual disability coverage can have even graver consequences for an ill or injured employee who has to stop working. If your mortgage increases unexpectedly, your ability to pay for shelter is at risk; if you lose your income and aren’t independently wealthy, you can’t pay for much of anything.”
Can I Afford Disability Insurance When Gas is $4 a Gallon?
Some personal finance articles and news reports have suggested that disability insurance is expensive. But disability insurance, particularly a combination of group and individual coverage, can be very affordable.
“Our research shows that many employees overestimate the cost of disability coverage,” said Barry Petruzzi, 2nd vice president, Group Life and Disability, Guardian. “Most employees can secure group coverage for just a few dollars each month and then supplement their discounted group insurance with a robust individual or voluntary (employer sponsored, employee-paid) policy. Most employees and business owners can purchase a top quality individual policy for significantly less than what they spend on gas each month. And most workers can purchase a group policy for less than what they spend on a daily-dose of coffee each month!”
“The point is,” Petruzzi concluded, “in challenging economic times it is more important than ever to ensure your greatest asset: your ability to earn an income.”
Guardian and Berkshire commissioned Insurance & Behavior: Life Without Income in recognition of Disability Insurance Awareness Month, an industry-wide consumer education effort observed each May.
More Disability Facts and Resources
- If you are temporarily unemployed and have an existing disability policy, some insurers such as Berkshire and Guardian waive your disability insurance premiums until you return to work.
- According to the LIFE Foundation (www.lifehappens.org) nearly 1 in 5 Americans will become disabled for one year or more before the age of 65.
- The number or workers who become disabled has risen by 35% since 2000, according to the Social Security Administration, as reported by the Council for Disability Awareness (disabilitycanhappen.org).
- An earlier Guardian study, Insurance and Behavior: Spotlight on Individual Disability Insurance, revealed that millions of Americans are ignoring the impact that an illness or a disability can have on their retirement savings. Nearly half (48%) of Americans say they would probably have to stop making contributions to their retirement account should they become disabled.
- Guardian’s study, Insurance and Behavior: Spotlight on Group Life and Disability Insurance, revealed that as many as 48% of employees don’t know that employer-paid disability income benefits are taxable.
These Guardian disability insurance research reports can be found at:
Disability insurance calculators can be found at: