Majority Are Skipping Disability Insurance -- And They Shouldn't: LIMRA

The majority of workers are skipping disability insurance — and most of them can’t afford to.

LIMRA research found that nearly six in 10 workers who opt out of disability insurance said it isn’t worth the cost or they don’t need the coverage. However, 75 percent of employees said they would struggle to pay for basic living expenses after several months if they became disabled and were unable to work.

Although most workers don’t believe disability insurance is a priority, more than 25 percent of 20-year-olds will experience a disability for 90 days or more before the age of 67, according to the Social Security Administration. In fact, one in four workers who chose to opt out of short-term disability coverage because they “don’t need it,” said they would have immediate trouble paying their bills if they became disabled, according to the report. Sixty-five percent said they would begin to struggle after several months of disability.

Workers who said they “don’t need” long-term disability insurance had a similar financial outlook. Twenty-seven percent said they would immediately struggle to keep up with their expenses while 69 percent said they would begin to struggle after several months, according to the LIMRA report.

Most employees consider it normal not to have disability insurance and there is little social pressure to own these products, according to LIMRA’s findings. Only 34 percent of employees agree with the statement “most people like me own disability insurance,” and less than half of workers said they agree that disability insurance is “right for someone like me.”

Outside of a work environment, the perception of the need for disability insurance differs drastically. Sixty-four percent of consumers said they believe most people need disability insurance, according to the 2018 Barometer Study. However, of those who said that disability insurance is important, only 20 percent actually owned it themselves.

Financial advisors can work with employers to educate workers about the cost of losing their income and how they can protect themselves against potential financial ruin. Advisors can also help clients who don’t believe they can afford disability insurance, budget their spending and create savings goals to help increase their financial confidence, LIMRA suggests.