By Cyril Tuohy
Pity disability income insurance! If it belonged to the animal kingdom, it would feel like the runt of the litter of the insurance family, behind life and long-term care insurance.
In its latest report, the Council on Disability Awareness (CDA) said 67 percent of consumers consider income one of the important things in life. Only their homes and good health are equally or more important to them.
But when asked what consumers consider most important to protect, 82 percent of respondents said health, 78 percent said the home and only 28 percent said income, according to the CDA’s 2014 Consumer Disability Awareness Study.
Consumers looking to rebalance their perceptions of income protection should think about contacting their human resources department, insurance agent or financial advisor, CDA President Carol Harnett said in a news release.
Other findings reveal unnerving perceptions of relative risk and the mixed-up priorities some consumers retain toward disability insurance, sometimes called the “forgotten insurance.”
One in two of the survey's respondents said they would tap savings and investments to pay bills if they could no longer work because of a disability — which averages 24.5 months. Yet, 57 percent said they only had enough money to pay bills for six months or less.
More than 20 percent of workers under the age of 40 said they were more likely to win the lottery than they were to become unable to work due to illness or injury. The odds of winning a jackpot are 1 in 259 million, but about one in four of today’s 20-year-olds will experience a disability before retirement, the report said.
In the survey, 27 percent of respondents said they thought the chances of being audited by the Internal Revenue Service were greater than the chances of becoming disabled. The chance of an IRS audit occurring is about 1 in 100, the report said.
So why are working adults not buying more disability insurance? In the survey, 33 percent of the respondents said they couldn’t afford it, 30 percent said they had never thought about it, and 24 percent said they didn't know enough about it.
In 2012, more than 650,000 disabled workers received more than $9 billion in long-term disability benefits through employer sponsored disability coverage, according to the CDA’s 2013 Long-Term Disability Claims Review.
In addition, there were nearly 11 million Social Security Disability Insurance recipients in 2012, with the average monthly SSDI benefit for a disabled worker coming to $1,130, according to America’s Health Insurance Plans.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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