DISABILITY PROBABILITY

|Resume | Daily CommentaryContact Us | Site Search  | Home Page | 

The odds of a person having at least one long term disability that lasts three months or longer before that person reaches age 65
Age Probability
25 44
30 42
35 41
40 39
45 36
50 33
55 27

And according to the 1985 Society of Actuaries, the following shows how many people have recovered, died or remained disabled for five years after a disabilities onset
Age at Onset of Disability Recovered Died Still Disabled
24 44.1% 9.7 46.2
35 34.0 12.3 53.7
45 21.5 19.9 58.6
55 11.8 28.5 59.7

DISABILITY INSURANCE: (California Broker, 1995) Many insurers have had significant adverse loss experiences- particularly in California. As such, many insurers are doing major restructuring on disability policies. The previous non cancelable individual policies polices were a good deal for the client. Non can policies are guaranteed to age 65 and cannot be increased prior to that age. In addition, the contractual agreement wording and renewability are also guaranteed and the company could not make any changes. Since companies have had severe losses they are now anticipated to change to guaranteed renewable policies that integrate with group long term disability and long term care. This means that policyholders cannot collect the full benefits under all of their policies.

Most of the claims stem from back ailments and stress and companies are beefing up their claims units just to handle this influx. In Texas, 1994 claims were 30% higher than in 1992 and during 1994, claims were up by 60%. Claims from stress and mental disorders are now 20% of all claims. Life Insurance Selling noted that "it appears that professional workers have begun to use their disability insurance as a bridge to retirement using its benefit to age 65 and cost of living riders to get to the social security and IRA payout dates." Many of the additional claims come from physicians (pressures due to health care reform, loss of income from Medicare, lower insurance benefits, loss of autotomy in managed care practices and less satisfaction overall) and the companies are restructuring that element to include:

1. certain medical specialists will no longer be covered by some companies

2. rates will be increased for physicians since they have been dropped a notch from their most favored status.

3. maximum limits of $10,000 to $15,000 per month as well as a maximum of $20,000 for overhead disability have been implemented.

4. there is a two year maximum payout for stress claims

5. "with regard to the total disability product, there is an "own occupation" definition to the first two years while collecting on a claim. Some companies have instituted an earnings policy in which the policyholder are only able to make a claim if their earnings are reduced by 20% to 25%. Many companies are substituting the earnings definitions and means that the policyholder's earnings are covered , not their occupations. Contracts that cover professionals will also no longer be available with most companies.

6. Insurability, cost of living and automatic increase in benefits options are no longer available with many companies.

7. Lifetime benefit payouts are history. A maximum payment to 65 or 70 will be the norm

8. Unisex ratings is being discarded in favor of sex distinct ratings thereby forcing women, who live longer and are subject to more claims, to much higher underwriting standards. Premiums for women may rise from 20% to 220% more than a male with most charging 50% to 70% more.

9. Signed copies of tax returns may be necessary before an underwriter will review an application. One carrier has indicated that they will not provide coverage to anyone who has had a mental or nervous disorder within the last five years.

Other changes include an attempt by companies to reduce payments over a period of time by offering lump sum payments instead. They will also institute more detective work by CPA's, video surveillance etc. to ascertain the viability of a claim. They also intend to bring lawsuits to rescind some policies. Lastly they will also attempt to uncover inconsistencies in longstanding claims to try to invalidate the claim.

This is a nightmare of new rules and regulations. If you currently have a policy, you need to do a complete review to determine it's viability.

DISABILITY INSURANCE: (1996) This insurance is getting tougher to get due to the massive claims companies have had in the past couple years. Here are a couple ideas if you are looking for a policy.

Income Replacement policy might be better than an own occupation policy (which may be next to impossible to get anyway). Under own occ, you may have to wrangle with the insurance company as to whether you can fulfill the functions of your job or whether selling pencils constitutes a suitable occupation.

Also consider buying residual coverage which is considered better than partial disability coverage. Under residual, part of the difference in income is paid if disabled and you can work park time. Partial pays a set amount- say 50%- but only for a period of time, say 6 weeks to a year.

DISABILITY COVERAGE: (Lewis/MetLife 1998) Disability coverage is costly, involved- but needed by many. The industry has gone through a major overhaul over the last four years since many of their "highest" rated clients ended up making huge claims due to "stress, backaches and chronic fatigue syndrome". An expert in the disability field was asked these questions.

Q: To what extent are mental health cases part of the disability caseload?

A: We have customers for whom over 20% of their claims are "mental and nervous" disorders. It has been a growing area for the past ten years because it is now more acceptable to seek treatment for mental and nervous disorders.

Q: How would you define 24-hour disability coverage?

A: The most simple vision of it from a delivery standpoint is that your health benefits and your time off/disability benefits are covered and managed regardless of whether the disability is work related or not. It has been extended by some people to include life insurance protection and/or auto injury applications. I look at it in terms of integrated health and disability delivery.

Q: What are the major issues involved in 24-hour coverage?

A: There are significant issues about how the coverage will be linked into the managed health care component. What kind of networks do you create that foster return to work? What incentives are there for physicians? These are issues that are more challenging than co-managing long term disability and workers' compensation. There are many systems issues, too. It is a major change that will take time to develop.

Q: Is the treatment of occupational and nonoccupational medical treatment different?

A: The medical treatment should be the same for the same type of illness or injury. We want to move toward a "best practice" of medical care. For example, if you break your leg or your arm at home on the weekend, the tissues are going to heal and the dangers of infection are the same as if the leg or arm had been broken at work. In a perfect world, injuries that are the same are treated the same. In workers' compensation you are dealing with a narrower band of disabilities, primarily injuries, fractures, lacerations, sprains and strains. In the nonoccupational disability area, you dealing with the whole broad range of illness.

Q: The physical disabilities (burns, breaks, cuts, etc.) of years ago have been augmented by the soft-tissue injuries (carpal tunnel syndrome, for example) and stress of today's workplace. How do you manage these "new" disabilities when they are not as obvious as burns, breaks, and cuts?

A: They require a substantial investment in specialized resources. For example, we have two physicians who are experts on chronic fatigue syndrome. It is very expensive to manage because there is not a test that can be used to isolate it positively. Rather, you must use a whole series of tests to eliminate other possibilities. The same approach is true in psychiatric and other illnesses, that are often very difficult to measure, particularly the severity of them, the length of treatment, and the course of treatment. These are the most difficult kinds of determinations to make.

Q: What are the biggest challenges facing the disability business today?

A: If we look across the industry, the incidence of claims is on the rise in the long term disability component, substantially higher in the last couple of years. In addition, the continuance rates of how long people are out on disability is increasing. Some people think that it is at a new level where it will stay for a while. There are lots of theories why this is happening (corporate restructuring, the emergence of new disabilities, breakdown of some of our social structure). They are all probably partly valid. From a financial standpoint, this affects the costs to those companies who are self-funded, as well as the premiums. Integrated approaches to disability through case management and other techniques have the potential to be extremely powerful ultimately in reducing costs.

DEPRESSION/MENTAL IMPAIRMENT: (1998) In 1992, the EEOC recorded 91 complaints of discrimination on the basis of emotional or psychiatric impairment, or 9.1% of all disability claims. By 1997, with the number of mental disability claims skyrocketing, that had jumped to 2,789, or 15.3%, making this, for the first time ever, the largest single category of claims. Complaints outnumbered those related to HIV, cancer, substance abuse, vision, hearing and diabetes-related disabilities combined. And preliminary numbers for fiscal  1998 show yet another increase.

PERCENT OF WORKING AGE MALES IN THE U.S. WITH DISABILITIES (1998): (1999) (FED Board of San Francisco)

Aged 25- 59...........9%

Aged 25- 34...........6.5%

Aged 35- 49 ..........8.5%

Aged 50- 59...........15.0%

Employment, Earnings and Transfer Receipt among Working Men with and Without Disabilities

(1991 dollars)
Total Employed Full time Employed Part time employed Mean Labor Earnings Receiving transfers
Men with Disabilities 71.8 45.9 25.9 19,369 48.7
Without Disabilities 97.8 84.2 13.6 39,819 15.2
Ratio 0.83 0.55 1.9 0.49 3.2

DISABILITY COVERAGE: (1999) Disability policies have seen a major change over the last few years due to the increase of claims for stress, chronic fatigue syndrome and back aliments. A good example is what happened to the Texas Medical Association Insurance Trust. From 1992 to 1997, their disability plan- backed by a major mutual life insurer- lost $36+ million even though there were policy benefit changes and two rate increases. A 52 year old physician saw his basic coverage increase by 62% for a standard 90 day elimination plan.

Women have been particularly affected due to the higher incidence of morbidity.

Limitations on mental and nervous conditions are now commonly restricted to a two year period. Added restriction s have been applied to additional coverage without evidence of insurability.

Higher income professionals may be limited to only 25% to 40% of their earned income

DISABLED: (1999) According to the Disability Management Sourcebook, the number of folks between 17 and 44 with severe disabilities has increased 400 percent over the past 25 years. One in seven people will become disabled for five years or more before they reach 65.

ODDS, STATISTICS AND DISABILITIES: (1999) The chances of using your homeowners insurance are about 1 in 88. The odds of using your auto insurance at about 1 in 47. The chances of using your LTC insurance is about 2 in 5. One out of two women and one out of three men will spend some time in a nursing home. (Journal of the American Society of CLU, 1996) More than 12 million older Americans will require some form of long term care by 2020. (Health Insurance Association of America). 72% of residents in a nursing home are women 90% of nursing home residents are over the age of 65. 22% of the disabled population is under age 65. (Puget Sound Life Underwriters Journal 1996). Functionally disabled people between the ages of 18 and 64 represent 40% of Americans needing long term care services. (Life Insurance Selling 1995)

The likelihood of needing LTC (obviously) increases with age. In 1991, 29.2% if those age 45- 64 had a disability; 44.6% between 65 and 74 had a disability; 63.7% between the ages of 75 to 84. 15.3% and 41.5% respectively had a severe disability. (Employee Benefit Research Institute, 1995) 80% of disabled persons are cared for at home or in adult day care centers. 72% of caregivers are family or friends. (Puget Sound Underwriters Journal). The cost of home care can run from $4.25 to over $200 daily depending on the level of skill needed (SF Chronicle, 1995). Caring for each Alzheimers patient will cost more than $213,000- on top of other medical expenses- over the remaining five years of their lives. (American Journal of Public Health, 1994). Over 99% of nursing home care is either custodial or intermediate care, not skilled care, and is not covered by Medicare or Medicare supplements (Journal of the American Society of CLU's, 1996). The reason you see statistics showing Medicare covering for 5% of costs is that skilled care is so much more expensive.

Disability Insurance: (Health Insurance Association of America (HIAA 2000) "Government statistics show that women who work outside of the home are three times more likely than men to miss work due to a disability-related illness." "Women make significant contributions to family income, so it is particularly important for them to know more about private disability insurance."

"There must be better outreach and education efforts by all of us to help employers and employees-especially women-- better appreciate the value of disability income insurance."

DISABILITY 2000: "......18.7% of the working-age population 18-64 (32.1 million people) report a disability. Of these, severe disabilities were reported by 8.7% (14.9 million); non-severe disabilities account for the other 10% (17.2 million)."

Almost twenty percent of people ages 15-64 report some level of disability.

Circle graph showing percentage of people ages 15-64 with severe and non-severe disabilities.

Nearly two-thirds of all work disabilities are severe.

Circle graph showing percentage of work disabilities that are severe.

Disability Insurance:  (2001) Premiums for group disability sales climbed 6% in 2000. Fully-insured LTD sales increased 14%, while ASO sales declined 35%.

Disability: (2001) This paper shows that global disability levels are higher than most people imagine and are set to grow higher still as a result of an aging population. Estimates of disability are presented from three different standpoints based on impairment, medical, and functional definitions of disability. The paper shows how most people in developed countries can expect something like 8-9 years of disability throughout their lives, much of it concentrated in the last few years.

Disability (National Safety Council 1997) 23,000 people are killed in accidents each year- 350,000 are disabled

13,000 are killed in work related accidents- 2,200,000 are disabled

21,000 are killed in public accidents each year- 2,700,000 are disabled

51,000 people are killed in vehicular accidents- 2,000,000 are disabled.

About 3/5ths of all disabling injuries occurring in 1998 were OFF the job.

23% of employees in firms with less than 100 EE's have long term disability

43% with more than 100 EE's have LTD

54% of companies with more than 100 EE's offer DI that covers only 60% of base salary.

Disability Insurance: (2001) ·The risk of a 40-year-old becoming disabled 90 days or longer prior to age 65 is 64%

·1 in 8 people are disabled for at least 8 days.

·The average disability period for a 40-year-old disabled at least 90 days is 5-1/2 years.

·Disability is more often sickness-related, not accident related (It can include mental and nervous disorders, heart conditions or even back problems.)

·Disability benefits are often paid to those currently working (with certain disabilities)

·Disability Insurance guarantees that income will continue.

DISABILITY (2001) The GAO estimates that there are now 1.6 million disabled people are being served in nursing homes, 106,000 in institutions for the mentally disabled, and 57,000 in state and county facilities for the mentally ill. The fast aging baby boom generation "could increase the number of disabled elderly people who will need care to between 2 and 4 times the current number,"

Disability insurance: (2002) statistics show that Yet female employees often overlook the need for disability income benefits, asking instead for improved medical and life insurance benefits.

Disability: Own occupancy- means insured can return to work in another occupation with no offsets on teh disability benefit. , if they are unable to perform their own occupation

Any occ- Means insured can return to work in any occupation for which they are qualified (based on education level and prior work experience)

Gainful Occ- Means insured can return to work in any occupation where they can earn 50% to60% of their former income (based on education level and prior work experience)

Loss of Earnings- Means insured qualified for one of the above definitions if their earnings are diminished

Loss of time or duties- Means insured qualify for any of the above definitions if the amount of time they can spend at the job is reduced or if the number of duties they perform are reduced

Flexible- Refers to a newer approach that allows insured to flex coverage between a range of definitions contained in the policy as their needs change. For instance, the more affordable any occ or gainful occ options may appeal to younger clients, but own occ (working or not) may be needed when skills are more specialized.

Disability- (UNUM 2002) The leading cause of long-term disability (more than 90 days) for working-age Americans was cancer, according to claims submitted during 2001. Rounding out the Top 5 List for long-term disability (LTD) causes are pregnancy complications, back and cardiovascular conditions, and depression. The list comes from UnumProvident’s extensive claims database, the largest private database of disability information in the U.S.

Leading the list of Top 5 causes of short-term disability (STD) workplace absence for 2001 was pregnancy (normal), followed by complications from pregnancy, injuries (excluding back), back conditions and digestive/intestinal conditions. The causes of claims and the percentage received for each cause were as follows:

LTD - 13 percent – Cancer, 12 percent – Complications from Pregnancy, 11 percent – Back, 9 percent – Cardiovascular, 5 percent – Depression

STD - 20 percent – Pregnancy (Normal), 9 percent – Pregnancy (Complications), 9 percent – Injuries (Excluding Back), 8 percent – Back, 8 percent – Digestive/Intestinal

But then there is this: A former medical director of UnumProvident is suing his former employer, alleging that the insurer encouraged him to help deny disability claims — and then fired him when he didn't.

The lawsuit further alleges that UnumProvident used nonmedical personnel called "claims specialists" and "appeals specialists" together with nurses to make benefits and medical-referral determinations rather than allow doctors to make those decisions.

Disability insurance: (2002) Unum Provident has 33% of the entire U.S. market for disability insurance but there appears to be some problems in claims payments. Unum noted that it handles 400,000 claims per year (75% for short term disabilities such as a broken leg) and that some dispute is apt to happen. True statement. But 60 minutes also did a negative review of the company.

Disability: (2003) every year 12% of the adult U.S. population suffers a long-term disability. One out of every seven workers will suffer a five-year or longer period of disability before age 65, and if you’re 35 now, your chances of experiencing a three-month or longer disability before you reach age 65 are 50%. If you’re 45, the figure is 44%.

Disability: (2003) less than a third of all employers view disability insurance as a way to speed a disabled employee's return to work, and fewer than one in ten of those who do offer disability insurance say they purchase long-term coverage to accomplish that goal. The data show that 86% of all employers understand that workers' comp and SSDI will not provide adequate coverage to their disabled workers. But, employers' opinion is mixed on whether or not workers appreciate the need for additional disability insurance, with 41% of those responding indicating their employees do understand the need for disability insurance, while only 34% said their employees do not understand the need.

Disability (Society of Actuaries 2003) Male workers over age 55 are 13 times more likely to submit a long term disability claim than a worker age 25. Females are 9 times more likely

Older workers are twice as likely to file for diabetes

Nearly 3.5 times file for an eye disorder.

Nearly four times more to file for cardiovascular conditions

Nearly four times more for malignant cancer.

More than 5 times more for artery  disease related disorders.

Disability: (Census Bureau) IN 1998, 17.2 million people or 9.9% had a disability that prevented or limited to work.

Disability. 9.4% of Americans have some form of disability between the ages of 35 to 44. It is 23% between 55 and 64.  

Disability Insurance: Training is  almost nonexistent for DI. There were as many as 535 DI carriers a short time ago and now there are only about 26.

Disability: (Zach Scott 2004) Here are 4 basic definitions of total disability offered by the various insurance carriers in the market place.

• “YOU ARE TOTALLY DISABLED IF YOU ARE UNABLE TO PERFORM THE MATERIAL AND SUBSTANTIAL DUTIES OF YOUR OWN OCCUPATION TO AGE 65”.

• “TOTAL DISABILITY MEANS UNABLE TO PERFORM THE MATERIAL AND SUBSTANTIAL DUTIES OF YOUR OCCUPATION TO AGE 65 AND ARE NOT WORKING IN ANOTHER OCCUPATION.”

• “UNABLE TO PERFORM THE DUTIES OF YOUR OWN OCCUPATION FOR 2 YEARS, THEREAFTER ANY REASONABLE OCCUPATION THAT YOU ARE SUITED TO BY EDUCATION, TRAINING AND EXPERIENCE.”

• "UNABLE TO PERFORM THE DUTIES OF YOUR OWN OCCUPATION FOR 2 YEARS, THEREAFTER ANY OCCUPATION THAT YOU ARE SUITED TO BY EDUCATION, TRAINING & EXPERIENCE."

Maine Regulators Release UnumProvident Report A 1999 report on Unum Corp. and Provident Cos. given to Maine regulators before they made the decision to allow the merger reveals that the companies had problems related to claims-handling practices and training that were magnified after the merger.

Disability insurance: (2004) At one point in time, many years ago, there were 535 disability insurers. That dropped to 390 in 1990. IN 2003, the number had dropped to 26.

These companies account for 69% of all non can premium in 2002- Equitable Life, Mass Mutual, Monarch Life, Mutual of NY, Northwestern Mutual, Paul Revere, Provident Life and Accident, Unum Life

Accounting for 25of total are Berkshire/Guardian Life, IDS Life, Mass Casualty, Met LIfe, National Life of Vermont, Principal Life, Standard Life, Swiss RE

Only about 27% of American Income earners have disability insurance. And I bret almost al of that is part of a package offered through company benefits.

Disability Insurance (2004) Odds of a disability lasting one year or longer

          Number in group 
Age 1 2 3 4 5
25 11.67% 21.98 31.09 39.13 46.23
30 11.34 21.40 30.31 38.22 45.22
35 10.98 20.75 29.45 37.19 44.09
40 10.50 19.90 28.31 35.84 42.58
45 9.83 18.70 26.69 33.90 40.40
50 8.83 16.88 24.21 30.90 37.00
55 7.24 13.96 20.19 25.97 31.33
60 4.62 9.02 13.21 17.22 21.04

 1985 Commissioner's Disability table- male based on 30 day elimination period

Give this a hard look. In a group of  5 people, age 45, there is a 40% chance of a disability lasting at least one year.

Obesity and disability: A UnumProvident (NYSE: UNM 2004) report released earlier this year cited a tenfold increase over the past decade in short term disability claims in which obesity was identified as the primary diagnosis. The figures released this week look at data from the same time period (1996-2003), pulling from the company’s database of 1.3 million disability claims. The company reports striking increases in claims for conditions in which obesity is either a risk factor or is strongly associated. The disability claim experience of these chronic health conditions includes:

• 4000% increase in syndromes that are primarily symptom-based such as fibromyalgia, chronic fatigue syndrome, irritable bowel syndrome or Gulf War syndrome

• 100% increase in hypertension and diabetes

• 78% increase in musculoskeletal disorders

• 63% increase in cancer

• 46% increase in back disorders

• 17% increase in cardiovascular disease

The National Business Group on Health (NBGH) warns that increasing obesity and related health issues hurt the well being of the workforce and threaten their employers’ bottom line. “Today’s employers must absorb increasing health care costs,” Anfield says. “According to the National Institutes of Health, the direct healthcare costs attributable to overweight and obesity are now estimated to be $123 billion, or 9% of total U.S. healthcare costs. The cost of treating type 2 diabetes attributable to overweight and obesity is estimated to be $98 billion. The cost of treating heart disease attributable to overweight and obesity is estimated to be $8.8 billion, or 17% of the total healthcare costs for heart disease.” Nationwide, obesity will cost employers $13 billion per year, reports the NBGH Institute on the Costs and Health Effects of Obesity. In addition, NBGH says obesity is annually associated with 39 million lost work days, 239 million restricted-activity days and 63 million physician visits.

OBESITY: UnumProvident researchers, who declared 2004 that STD claims had jumped tenfold over the past decade due in large part to obesity, took that finding a step further by studying 1.3 million claims filed between 1996 and 2003 for conditions in which weight gain either is a risk factor or with which it is strongly associated.

The analysts found a 4,000% increase in syndromes that are primarily symptom-based, such as fibromyalgia, chronic fatigue syndrome, irritable bowel syndrome or gulf war syndrome; a 100% increase in hypertension and diabetes; a 78% increase in musculoskeletal disorders; a 63% increase in cancer; a 46% increase in back disorders; and a 17% increase in cardiovascular disease. Dr. Robert Anfield, UnumProvident vice president, calls these findings "alarming," noting that they illustrate the burden of suffering and increase in healthcare costs attributable to the obesity epidemic.

The National Business Group on Health says increasing obesity and related health issues hurt the well-being of an employer's workforce and threaten the bottom line. It cites National Institutes of Health findings that peg the price of obesity at $123 billion, or 9% of total U.S. healthcare costs. Treating type 2 diabetes - usually attributable to obesity -- alone consumes $8.8 billion. Additionally, NBGH says it attributes to obesity some 39 million lost work days, 239 million restricted activity days and 63 million physician visits.

It is also for this reason that I stated years ago that LTC premiums would have to go up. There were a lot more illnesses that would occur due to obesity and causing more care. But it would also take MORE people to do the same care, It's tough enough rolling over someone that weighs 150#- but you need two people if they weigh 250#. More caregivers in a facility means more money to pay for them. I believe that is one big reason (pun intended) why premiums have escalated. The companies are seeing the results of the studies above.

Disability Information

Disability Information

National Health Interview Survey on Disability

More Factors to consider about disability income insurance coverage: (Tony Steuer), Nearly half of the 1 million Americans who filed for bankruptcy protection last year did so after being sidelined by an unexpected illness or injury. Source: New York Post, April 3, 2000; “There’s no insuring you won’t go bankrupt”.

The Social Security Administration predicts that over the following ten years, the aging baby boomer generation work force will spark a predicted 37% increase in incidence of disability. Source: Spencer’s Research, 1997

48% of all home disclosures are the result of disability, while only 3% of foreclosures result from the death. Source: Housing and Home Finance Agency of the U.S. Government, 1998.

Most People have savings to cover less than six months of expenses. Source: Business Almanac, 1997.

Disability Insurance: (JHA 2004) As of the middle of this year, short-term disability, in terms of new sales and earned premium, had shown steady growth from the year before, while new long-term disability sales remained flat.

According to the report, carriers report a 7% jump in new STD sales premium, a 3% rise in new STD lives and a 1% increase in new cases. Meanwhile, new LTD cases rose 4% and new LTD lives decreased 8%.

JHA researchers note that some insurance carriers saw STD sales grow more than 25%. They speculate that as health care costs continue to rise, STD may be an easier sale to employers and employees. Meanwhile, insurance companies appear to be targeting smaller LTD cases with higher average premium per live. Hence, LTD earned premium is still growing moderately.

Disability: (2005) MetLife has found that in its experience back sprains, fractures and repetitive-motion strains dominate short-term disability (STD) claims while sprains, disc disease, malignancies and heart disease are common among long-term disability (LTD) claims.

Disability is the cause for 48% of mortgage foreclosures. Only 2% due to the death of the breadwinner.

Form for disability coverage
Policy Options Discussed and Understood To be Included in Policy

Please Initial

Not to be included in policy

Please Initial

Residual Disability Coverage
Cost of Living Adjustment
Full own OCC
Limited own occ
Full mental/nervous benefits
Limited mental/nervous benefits
Lifetime benefits
No corollary source offset
Guaranteed renewable
Non cancelable
Future increase option
Automatic increase option
Pre existing condition exclusions
Others

What are the odds?: (2005) in the next hour 194 people will be injured in car accidents, 57 homes will catch fire, 230 people will die, and 1,027 will become disabled.

Disability insurance:  (2005) In 2003, about 372,000 new policies were sold, about 5 percent fewer than in 2002. Fewer than 215,000 policies were sold in the first nine months of 2004.

A Limra study found that while practically all companies with more than 5,000 employees offer disability insurance, availability declines sharply as head count falls. The benefit is offered at under half of companies with fewer than 100 employees.

While policies vary greatly, the basic idea is to ensure that when people are unable to work because of an illness or injury, they can still cover monthly expenses. Policies, which typically pay around 60 percent of an individual's pretax salary, can cover both short-term disabilities, which may keep someone out of work a few weeks, and long-term disabilities, which may last years. About 3.85 million people have bought some form of disability insurance on their own.

A Census Bureau study found that a typical 35-year-old making $50,000 a year had enough savings on hand to cover only two months of expenses. Yet most disabilities last 90 days or longer, and more than 1.5 million Americans are considered permanently disabled and unlikely ever to return to work.

a Limra study found that more than half of those who bought disability insurance in the previous year did not know what percentage of their salary they would receive if they were injured, and that 45 percent did not know their policy's definition of disability. Nearly two-thirds of those surveyed had postponed buying the insurance so they could study it further.

As a personal observation, this research on this insurance is almost mind numbing. In many cases, you CANNOT get a price for the policies after year one. Makes it difficult to analyze.

Here is an example:  you can buy a policy and get- say, $40,000 a year in payments if you become disabled. But the base policies do not include inflation protection. So you buy a rider. But the rider may only increase the payments UNTIL you get disabled and then the inflation rider STOPS. If you want such payments to increase for inflation DURING disability, then you have to buy another rider. And they are expensive.

Work, work, work: (Occupational and Environmental Medicine 2005) Those who work overtime are 61% more likely to suffer occupational injuries than those who work regular hours. Working at least 12 hours a day is linked to a 38% increased risk of injury, and a minimum 60-hour week is associated with a 23% greater chance of being hurt at work,

Disability Risk and the Value of Disability Insurance (2006) We estimate consumers’ valuation of disability insurance using a stochastic lifecycle framework in which disability is modeled as permanent, involuntary retirement. We base our probabilities of work limiting disability on 25 years of data from the Current Population Survey and examine the changes in the disability gradient for different demographic groups over their lifecycle. Our estimates show that a typical consumer would be willing to pay about 5 percent of expected consumption to eliminate the average disability risk faced by current workers. Only about 2 percentage points reflect the impact of disability on expected lifetime earnings; the larger part is attributable to the uncertainty associated with the threat of disablement. We estimate that no more than 20 percent of mean assets accumulated before voluntary retirement are attributable to disability risks measured for any demographic group in our data. Compared to other reductions in expected utility of comparable amounts, such as a reduction in the replacement rate at voluntary retirement or increases in annual income fluctuations, disability risk generates substantially less pre-retirement saving. Because the probability of disablement is small and the average size of the loss — conditional on becoming disabled — is large, disability risk is not effectively insured through precautionary saving.

Disability Insurance: (2006) A MetLife survey of 401(k) participants indicates that only 43% have individual or group disability insurance and 59% have less than $5,000 in personal savings. As a follow-up question, researchers asked what participants would do if they needed $10,000 to $35,000 for a major illness. 27% said they would get the needed money from savings and investments; 21% said they would have to use home equity; 25% said they would have to tap into their retirement and 26% had no clue.

The Social Security Administration (SSA, 2003) estimates that three in 10 of today's 20 year olds will suffer a disability before reaching age 67. In another sobering statistic, the SSA reports that 75 percent of people working in the private sector have no long-term disability insurance. Essentially, three of four workers would have to rely on their own personal savings, limited state-run insurance and Social Security for replacement income in the event they could not work because of a disability. In August 2004, the average monthly Social Security benefit for disabled workers was $867. Over the course of a year, that totals approximately $10,400, and for many workers and their families, that is significantly less than their annual expenses.

Disability (2007)

Event                     Frequency

Home fire                       1 out of every 88 homes

Serious auto accident      1 out of every 70 autos

Death                             1 out of every 106 people

Disability                          1 out of every 8 people

Physical Disabilities: (2007) Nationwide in 2005, an estimated 19.6% of adults had a disability. Among states and territories, the prevalence of disability ranged from 11.5% in USVI to 27.1% in West Virginia (Table). Nationwide, a smaller proportion of adults with a disability engaged in recommended levels of physical activity than respondents without a disability (37.7% versus 49.4%; p<0.01). A smaller proportion of adults with a disability met recommended levels for physical activity than adults without a disability in all states and territories except USVI, where the difference was not significant. Among states and territories, the prevalence of persons with a disability who met recommended physical activity levels ranged from 23.2% in Kentucky to 53.3% in Alaska.

Nationwide, 25.6% of persons with a disability reported being physically inactive during a usual week compared with 12.8% of those without a disability (p<0.01). Adults with a disability were more likely than those without a disability to be physically inactive in all states and territories except USVI, where the difference was not significant. Among persons with a disability, the prevalence of physical inactivity ranged from 15.3% in Utah to 50.2% in PR.

I knew the wait was bad, but not this bad- Social Security Backlog Means Waits for Disability The number of people seeking help from the Social Security Administration (SSA) because they are too disabled to work has created a record backlog of appeals that is rapidly continuing to grow as the Social Security program approaches its 62nd Anniversary on Tuesday, August 14. More than 745,000 applicants are waiting an average 17 months for their disability case to be heard, both record numbers. The SSA says this backlog has doubled in only the last six years, and estimates it could reach 1 million cases by 2010. An increasing overall population and the aging of baby boomers have contributed to the buildup, as older workers are more likely to become injured or sick on the job. At the same time, the agency is at its lowest staff level in over 30 years, having lost more than 2,300 workers since 2005. To receive disability, a state agency of the SSA must first review the claim in a process taking an average of three to four months. Approximately 65 percent of the 2.5 million people filing disability claims each year are denied at first, until appeals are heard by federal administrative law judges. 62 percent of appeals are ultimately approved, but average waits for hearings range from an additional nine months (Harrisburg, PA.) to 31 months (Atlanta, GA). “This is a completely unacceptable way to treat workers who have given so much to their jobs they are physically unable to continue,” said Edward F. Coyle, Executive Director of the Alliance. Currently, 15.3 million people are collecting disability benefits, an increase of 24% over the past five years.

Disability Insurance: (2008)  only 58% of full-time employees say they have disability income insurance protection, according to the 6th annual MetLife Study of Employee Benefits Trends.  Nearly half of those, 41%, admit they don’t know how much protection they have.  The majority of working Americans (59%) have taken no steps to determine their households’ needs with regard to disability coverage.  For single people – who likely have only their own income to rely on – and young families – the majority of whom (59%) admit to living paycheck to paycheck – the loss of steady income can be especially devastating.