More Than Half of Adults Could Not Meet Expenses If They Became Disabled, Survey Shows

February 28, 2007

Most Americans are not prepared to deal with the possibility of becoming disabled and, in turn, unable to work, according to new research by the National Association of Insurance Commissioners (NAIC). More than half (56 percent) of U.S. adults say they would be unable to pay their bills or meet expenses if they became disabled and could not work for a year or longer.

The survey, fielded by International Communications Research, showed consumers have an optimistic picture of their future, with only 13 percent saying it was somewhat or very likely they would become disabled and unable to work. However, data from the Social Security Administration (SSA) indicates that a substantial portion of the nation’s population — 20 percent — will actually become disabled for a year or more before reaching age 65.

These findings highlight the need for long-term disability insurance, designed to protect people financially by replacing some of their lost income. In the NAIC survey, only 44 percent of respondents indicated they had long- term disability coverage. Of these individuals, 71 percent said their long- term disability insurance was employer provided rather than individually purchased. This suggests a significant number of people could lose their coverage in the event of a change in employment status.

“Many people don’t think about the impact becoming disabled can have on their ability to earn a living and remain financially independent,” said Walter Bell, NAIC President and Alabama Insurance Commissioner. “Understanding the role of disability insurance at each life stage is critically important to one’s total financial security.”

The NAIC provides information on disability insurance for consumers in all life stages on its consumer education Web site, Insure U (

The Basics About Disability Insurance

For insurance purposes, disability is typically defined as the inability to work due to an illness or injury, although the definition varies among different insurance companies and policies.

There are two main types of disability insurance: short-term and long- term.

Short-term disability insurance, which some states require employers to carry for their employees, replaces a portion of the policyholder’s salary for a short-period — typically from three to six months following a disability. The specific percentage of replaced income varies with different policies.

Long-term disability insurance coverage typically begins after the policyholder is disabled and unable to work for at least six months. The coverage period can extend for a specific number of years or until the policyholder retires or turns 65, depending on the policy selected and the type of disability. Though policies can be costly, being disabled for a long period of time can be financially devastating. According to research by the U.S. Department of Education and the National Institute on Disability and Rehabilitation, the most common causes of long-term disability are heart disease, back injuries and cancer, followed by anxiety and depression. In 2005, about a third of disabled worker beneficiaries had been diagnosed with a mental disorder, according to the SSA.

Consumers should not confuse disability insurance with workers’ compensation — a benefit that employers are required to carry in most states for employees who are injured on the job.

“Before purchasing any disability policy, consumers should check with their state insurance department to make sure the company offering the coverage is legitimate, solvent and authorized to do business in their state,” said Catherine J. Weatherford, NAIC executive vice president and CEO.

Source: NAIC,

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