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Portfolio > Economy & Markets > Fixed Income

It's Benefits Enrollment Time: Start Stressing Income Protection with Disability Income Insurance

By Barry Lundquist

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During this year’s traditional benefits enrollment season, the Council for Disability Awareness (CDA) urges agents and brokers, in partnership with employers, HR professionals, and the media, to step up efforts to educate wage earners about the risks and financial consequence of an income-limiting disability — and to encourage them to take appropriate steps to offset the risk.

A soon-to-be-released CDA survey shows that many wage earners see themselves as extremely unlikely to miss work because of an accident or illness. Their misperception is that disabilities do occur, but are typically due to such catastrophic events as a serious accident, rather than more common causes such as bad backs, chronic illnesses, heart disease, or cancer.

While most believe that a “serious accident” was the most likely cause of a prolonged disability, the reality is that only 10 percent of long-term disability claims result from accidents. (See sidebar, “Disability Claims by Diagnosis,” for more information).

The adversary: lack of preparation
This enrollment season, the discussion about the risks and consequences of disability couldn’t be more important, considering the difficult economic times and the many misconceptions American wage earners have about how they would meet the financial burdens of a disability. When asked what they would do if their incomes ceased, most wage earners admitted to being poorly positioned to avoid severe financial hardship.

What should motivate trusted advisors to educate clients about their risks of disability and financial preparedness this enrollment season are the disconcerting responses wage earners gave when asked about their attitudes about preparing for a disability.

When asked what measures they had taken and what plans they had made, among the most common answers were, “I haven’t really thought about it” and “I’m healthy; I don’t need a plan because I don’t believe I’ll become disabled.” It’s a form of financial Russian roulette that can be exposed and solved only through wage earner education.

Education: the necessary next step
Though enrollment season is a prime time to discuss disability since clients have benefit selection top of mind, education is imperative no matter the time of year. Here are three things that you can use year round to help your clients better understand their own chances of becoming disabled by illness or injury.

  1. Sharing “five questions every worker should ask” will set your clients on the path to understanding what coverage they currently have through their employers and what gaps may leave them financially vulnerable.
  2. Additional advisor resources can help your clients start their disability planning and help you start the conversation at the CDA Advisor Resource and Information Center. Asking hard-hitting questions such as the ones here may be the eye-opener clients need to help them get the protection their situations demand.
  3. Agents can also use a newly released paper version of the popular Personal Disability Quotient tool. They can have clients, prospects or employees in an enrollment meeting fill in their responses and calculate their risk of becoming disabled. It is a great way to initiate a conversation about protecting a wage earner’s most important financial asset — the ability to earn a living — for pennies on the dollar.

Awareness and education are paramount when it comes to being financially prepared, but they’re only part of the solution. Putting a plan in place that will help clients mitigate potential financial risk is crucial. Begin the process of disability planning at with the tips above, and make sure your clients are educated and prepared.

Barry Lundquist is the interim president of the Council for Disability Awareness. He can be reached at [email protected] or 207-774-2634.

Disability Claims by Diagnosis
% of new and existing LTD claims
2008 2009
Claim diagnosis by category New* Existing* New* Existing*
Musculoskeletal/connective tissue 25.5% 28.2% 26.2% 28.5%
Nervous system-related 6.6% 13.7% 6.7% 13.7%
Cardiovascular/circulatory 8.6% 13.2% 8.9% 13.1%
Cancer and neoplasms 14.9% 8.1% 15.3% 8.4%
Injuries and poisoning 10.7% 7.2% 8.8% 7.2%
Mental disorders 7.4% 7.1% 7.8% 7.2%
Respiratory system 2.1% 3% 2.2% 3%
Symptoms, signs, and ill-defined 3.2% 2.5% 3.5% 2.7%
Infections and parasitic diseases 1.2% 2.5% 1.2% 2.4%
Digestive system 2.5% 2.2% 2.6% 2.2%
Endocrine, nutritional and metabolic diseases, and immunity disorders 1.2% 2.2% 1.3% 2.1%
Genitourinary system 2% 2% 2.1% 2%
Complications of pregnancy, childbirth, and the puerperium 7.3% 1.1% 7.5% 1.1%
Skin and subcutaneous tissue .8% .9% .8% .9%
Congenital abnormalities .5% .9% .4% .9%
Blood and blood-forming organs .2% .2% .2% .2%
Other 5.2% 5% 4.5% 4.1%

* “New” claims are those approved in the survey years. “Existing” claims are ongoing but approved in prior years.

SOURCE: The 2010 CDA Long-Term Disability Claims Review

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Are You Prepared for a Disability? 5 Questions Every Worker Should Ask

Illnesses and accidents are on the rise in America, causing more workers to miss work and lose income. At some time during their working careers, three out of every 10 workers will suffer a disability and be unable to work for a significant period of time.

Loss of income can be devastating – and today, it’s more important than ever for workers and their families to understand how they would manage their regular expenses during a period of lost income and make sure they’re prepared.

To help workers better understand how prepared they are should the unthinkable happen, here are five questions every worker should be asking themselves. Ask your clients, and your clients’ employers, the same questions, and fill in the gaps where necessary.

  1. What are my “necessary” monthly living expenses that would continue if my income stopped (e.g., rent or mortgage, utilities, food, medical insurance, etc.)?
  2. Would my personal savings pay for my “necessary” monthly expenses – for one month, three months, six months, longer? Would my savings cover my “out of pocket” medical expenses (deductibles and copayments)?
  3. Does my employer have a sick-pay plan or long-term disability program – or both? Am I participating? When would it start, how much would it pay me, and for how long would it pay me?
  4. What other sources of income are available to help me pay for my expenses, and for how long (e.g., spouse, family, second mortgage, credit cards, etc.)?
  5. Could I afford my medical COBRA premiums, and what would happen to the contributions to my 401(k) account?

Answering these questions is a good start to help your clients and their family prepare should a disability interrupt their ability to earn a living.

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