While most U.S. workers say they're familiar with disability insurance, when asked to explain what the insurance actually covers, few workers can provide specific details, according to a new survey.
About 13% of employees said they know "a lot" about disability insurance, and less than half of those who said they have coverage knew how much it costs (41%) or what its benefits are (47%), according to a national survey of 1,200 employees by the Consumer Federation of America (CFA) and employee benefits provider Unum.
"Workers need better protection against their loss of income from missing work because of injury or illness," said Stephen Brobeck, executive director of the CFA.
Brobeck said data from the Society of Actuaries indicates that nearly one-third of employees between the ages of 35 and 65 will be out of work for at least three months because of injury or illness. "A large majority of these injuries and illnesses are not caused but work, so don't qualify for worker's compensation," he said.
The survey indicates that a sizable number of employees are aware of the risk of disability, but greatly underestimate the extent of their potential work loss, he said. "They think that only one quarter of disabled workers missing at least three months work remain disabled for at least two years," he said. "But the actual percentage of those out at least two years is 50%."
While workers may know little about group disability insurance, nine out of 10 employees say they want this coverage and would pay for it.
When employees are given information about disability insurance, 90% said they want this coverage, and 86% indicated that they would pay half of a $30 monthly premium, with 56% saying that they would pay this entire insurance premium to gain income protection.
"Almost all workers wisely want disability insurance protection and are willing to help pay for it," Brobeck said. "But since only about one-third have long-term disability insurance there is a huge gap between worker desire for coverage and the extent of actual coverage."
Group disability insurance provides financial protection to employees unable to work because of injury or illness. Depending on the specific plan, within one week to six months after an employee stops working, he or she starts receiving payments equal to about 60% of his or her income. About one-third of workers are protected by long-term disability insurance, whose monthly premiums - paid for by the employer, employee, or some combination - usually range between $10 and $30.
Employer-sponsored disability insurance provides income protection that is not available from workers' compensation or Social Security Disability Insurance. Workers' compensation is available only to employees who are injured or made ill on the job. Social Security Disability Insurance benefits average only $13,000 a year.
"The ability to earn a living-our income-is the most valuable asset [workers] have, and protecting that asset is increasingly important," said Thomas R. Watjen, president and CEO of Unum.
CFA and Unum officials said that the high value employees place on the availability of disability insurance, and their personal desire for insurance coverage, reflect the fact that most workers say they would suffer financial hardship if not able to work.
About 77% of all employees surveyed said they would suffer great or moderate financial hardship if they did not work for three months because of injury or illness, with 50% indicating great hardship. About 78% of workers polled said they would experience great financial hardship if they did not work for 12 months.
The CFA-Unum phone survey was administered by Opinion Research Corp International (ORC) over three weekends in late March and early April.
-Jim McConville