By Cyril Tuohy
Two separate surveys by top health and disability insurers reiterate the value of employer-based group disability insurance as an income-protection strategy for their employees. Many of these workers are likely to suffer from a disability relatively early in their lives.
In one survey, issued by the insurance carrier Unum in conjunction with the Consumer Federation of America (CFA), nearly all disability insurance beneficiaries (95 percent) agreed that they would encourage other people to get disability coverage through their employers.
The survey also found that nearly three fifths (58 percent) said that their disability benefits made them feel more favorable about their employer.
“Without employer-sponsored, long-term disability payments, the vast majority of beneficiaries did not believe their income would have been adequate to maintain an acceptable lifestyle, even if they were receiving SSDI (Social Security Disability Income),” the authors of the Unum-CFA report said, summarizing their findings.
Long-term disability insurance claims payments of $9.4 billion in 2012 increased by 0.4 percent over 2011, according to the Council for Disability Awareness. As many as 662,000 people who could not work in 2012 because of a disability received compensation. As the economy improves, demand for disability insurance eases.
A group long-term disability policy typically replaces 60 percent of lost income, but employees are free to purchase supplemental, long-term disability coverage to replace an even greater share of their lost revenue.
Contrary to many perceptions, many people who join the disability rolls are young. Just over one quarter of today’s 20-year-olds will become disabled before reaching age 67, according to the Social Security Administration.
In a second survey released by the MassMutual in conjunction with the Society for Human Resource Management, the 2013 Employer Perspectives on Disability Benefits study, 83 percent of employers offering group long-term disability insurance felt the base amount of disability coverage was adequate.
Gaps in coverage still exist particularly for top executives who are highly compensated and usually have higher expenses, the survey found.
“This study provides valuable insights and perspectives that may not have been available to employee benefits executives and benefits managers before,” Melissa Millan, senior vice president of worksite insurance for MassMutual, said in a statement. “Clearly, considering and addressing the shortfalls is the place to start.”
A total of 78 percent of base group, long-term disability plans do not cover variable compensation, such as bonuses and commissions, and only 21 percent of organizations said they offer ‘buy-up’ coverage, the survey found.
The survey also found that 29 percent of companies were concerned that highly compensated workers with income in excess of the plan limit are not properly covered. In addition, 19 percent of respondents said they offer supplemental individual disability income insurance coverage.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].
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