Certain Occupations Underinsured For Income Protection

By Cyril Tuohy

InsuranceNewsNet

Employees in manufacturing, health care and education are underinsured for disability insurance and income protection, an analysis by Colonial Life & Accident reveals.

According to Colonial Life’s database, manufacturing workers who purchase disability policies buy only enough coverage to protect 33 percent of their income in the event they become disabled. Education employees purchase coverage to protect only 37 percent and, health care employees, only 36 percent. The industry usually recommends replacing 60 percent of lost income.

Many private-sector employees have the option of buying group long-term disability through their employer at very low rates.

Still, the number of underinsured employees working in those three industries alone may be as high as 37 million Americans, Colonial Life said.

The statistics for the analysis were generated from Colonial Life’s database of policies, the company said.  The company had more than 3 million policies in force at the end of 2011.

“This kind of coverage gap puts them at tremendous risk, especially considering that more than half of all households say they couldn’t raise $2,000 a month, if needed,” Steven Johnson, assistant vice president for product development at Colonial Life, said in a news release.

Disability coverage matters because of the sheer numbers of people who will become disabled in their lifetimes, and not for the reasons they expect. One out of four of today’s 20-year-olds will become disabled before reaching age 67, and one in seven workers can expect to be disabled for five years or longer, according to the Social Security Administration.

In addition, as many as 90 percent of all disability claims are related to chronic conditions like cancer and cardiovascular complications, or musculoskeletal and nervous system disorders, not to on-the-job injuries, according to the Council for Disability Awareness.

“The likelihood of experiencing a disability — whether short-term or long-term — is much more common than you might think,” Johnson said.

Voluntary short-term disability insurance to cover employees between when paid time off or sick leave end and long-term disability coverage begins can help fill the gap, Johnson said.

Employers in the market for short-term disability coverage should make sure the policy is issued without asking health questions, that employees remain covered if they leave their jobs, and that the policy offers tax savings on the benefits.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He has also written about food, restaurants and travel. He can be reached at [email protected].

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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].