Early in my insurance career, I began working with a young attorney. He had been in practice for 10 years, was married with two young children, and seemed to be an ideal prospect for life and disability insurance. There was just one problem — he thought he was invincible.
“And if I do become disabled, you can just prop a phone up to my ear and I’ll continue to earn my living,” he’d say. Fortunately, I had the presence of mind to ask him if he knew anyone who had missed work recently due to cancer, heart disease, arthritis, multiple sclerosis or lupus. He did. He quickly realized that his solution for propping a phone up to his ear wouldn’t actually cut it if he became disabled. He better understood the necessity and bought an individual disability insurance (DI) policy to protect his income.
Our clients generally can’t imagine themselves in less than perfect condition, so they inevitably ignore or — worse yet — assume away reality. Here are some of the other myths our clients believe and how we can help them see the truth.
Big Myth No. 1: “It won’t happen to me”
Psychologists call it cognitive dissonance. In the face of the unpleasant possibility, we simply re-create a world without disabling forces. But there is credible data suggesting even the healthiest and ablest can become disabled.
» Encourage your clients to check their Personal Disability Quotient at DisabilityCanHappen.org. They can explore their own specific statistics within the generic 25 percent chance they’ll miss work sometime in their career for 90 days or longer due to disability. In an associated poll conducted by the Council for Disability Awareness, two-thirds of respondents were shocked the statistics were that high. They believed the probability of becoming disabled was less than 2 percent!
» The chances your client’s house will burn to the ground this year is 0.03 percent, according to U.S. Fire Administration statistics. There’s an 18 percent chance your client will total their car during their lifetime, and there’s a 25 percent chance they will experience a disability lasting at least 90 days, according to the Council for Disability Awareness. Your clients likely have homeowners and auto insurance — in most circumstances they have to. Although disability insurance isn’t “required,” the underlying risk has a substantially greater likelihood of occurring.
Big Myth No. 2: “There’s always workers’ compensation”
Many people believe if they do become disabled, it will likely result from an accident occurring at work and, by extension, believe that “workers’ comp” will provide income replacement. But in fact, the Council for Disability Awareness reports 90 percent of all disabilities are from illness. And although it’s true that workers’ comp replaces a portion of income in the event of a work-related injury or illness, the council’s statistics show there’s less than a 5 percent chance that disabling injuries and illness are work-related.
Big Myth No. 3: “It’s too expensive”
No one wants to become “insurance poor,” and clients don’t need to buy insurance for every risk. For example, the likelihood of being hit by an asteroid is one in 700,000 and is an unlikely exposure to insure. However, for risks that don’t happen very often, but which have a high financial consequence, insurance is an ideal and affordable way of shifting the financial impact.
There are numerous ways to acquire disability insurance, from plans covered or offered by employers to association plans to individual coverage. All have their own benefits and commensurate costs.
But in the final analysis, you can help your client consider the cost of not having insurance for disability, especially in light of the Council for Disability Awareness’s findings that there is an initial 25 percent chance of a disability occurring and as much as a 40 percent chance a 90-day disability will last five years.
Big Myth No. 4: “I’m too young; disability happens to older people”
The Council for Disability Awareness reports approximately 22 percent of new disability claims filed are from people under age 40, and 30 percent of all disability claims are made by those in the 20-to-49 age group.
But here’s another example of cognitive dissonance: The Council for Disability Awareness indicates more than 20 percent of workers under age 40 believe they are more likely to win a Mega Millions Jackpot than to become unable to work due to illness or injury. In reality, there is less than a one in 260 million chance of winning the jackpot, versus a one-in-four chance of an income-interrupting disability.
Big Myth No. 5: “I’ll apply for Social Security benefits”
The Social Security Administration (SSA) reports its final award rate for disabled-worker applications averaged 36 percent for claims filed from 2004 to 2013. SSA reported it denied an average of 61 percent of disability claims. For claims that were approved, the average monthly Social Security disability benefit was $1,165. It’s probably not enough to pay the mortgage, put food on the table and give the kids a modest spending allowance.
Let’s consider some additional information:
The American Journal of Medicine reports that every 90 seconds, someone files for bankruptcy in the wake of a serious illness. In fact, more than 50 percent of all personal bankruptcies have underlying, unpaid medical expenses.
» Only one-third of today’s workers have disability insurance through work, leaving an estimated 75 million Americans without coverage. Yet the Federal Reserve reports that three-quarters of workers today do not have enough emergency savings to cover six months or more of their expenses and half of all households could not raise $400 for an immediate financial emergency.
» According to a 2012 FBI report, the risk of a home robbery is .113 in 100, but people believe they’re more likely to be robbed than to become disabled (in spite of the 25 percent likelihood of incurring a disability lasting at least 90 days during people’s working years).
Convinced? Share the facts and help your clients explore the benefits and costs of indemnifying them and their families in the event of an income-disabling sickness or accident. Using an online DI insurance quote calculator — such as the one found on the Guardian Life website — makes it easier for your clients to evaluate disability income insurance. It provides them information online about how much disability coverage will cost and lets them see what increases or decreases the price. That way, when they work with you to purchase insurance, they already have a good understanding of the pricing and coverage they want.