Taking a Look at the Private Disability Insurance Market

If you become disabled due to an injury or serious illness, you may be unable to work for a living as a result of your impairments. If this occurs, you have several different potential sources of income to turn to: Social Security Disability benefits (SSD), workers’ compensation disability (available only if you are injured on-the-job) and private disability insurance.

While private disability insurance could supplement benefits received through other state and federal disability programs, our Boston disability lawyers know that most people do not have access to these types of benefits. In fact, Life Health Pro recently took a close look at the private disability insurance market and identified three challenges or barriers that prevent most people from taking advantage of this type of insurance protection.

The Challenges in the Private Disability Insurance Market

Life Health Pro discussed the three biggest challenges for brokers selling private disability insurance, but unfortunately these challenges are the same ones that preclude employees and individuals from buying or having access to this insurance protection.

One major issue is that private disability insurance is often seen as too costly. Employers are deterred from buying this type of coverage for employees by the expense and thus do not offer it as part of employee benefits packages. For lower-paid workers, this is especially an issue. Among workers making less than $12 per hour, only a reported seven percent actually have access to a private disability insurance policy at work.

Since few employers offer these benefits, they are not considered to be a standard part of a benefits package like health insurance coverage often is. This means that employees typically aren’t as active in trying to secure disability insurance as part of their employment benefits package, and most employees don’t consider this as a factor when searching for a job and evaluating the benefits package offered. This creates a further disincentive for employers to buy a product for employees that many already view as too costly.

When an employer doesn’t offer disability insurance as part of the benefits package, this leaves employees to try to purchase the coverage on their own in the individual insurance market. Not only can this be confusing, but most people don’t look at disability insurance in the same way they look at other insurance projects as something they need to have to protect their future. Individuals who don’t realize they need private coverage or who don’t know how to shop for it are unlikely to make an effort to buy, especially as many individuals are also deterred by the cost.

While a reluctance on the part of employees and employers to spend the money for coverage is understandable, it can also be a big problem if a worker does become disabled. Disability benefits through the Social Security Administration are hard to qualify for, provide no income in cases of short-term disability, and in many cases provide monthly benefits that keep you just above the poverty line if you are disabled. Without income provided by private disability insurance, living with a disability could thus be very difficult because of financial, as well as medical, concerns.

Other problems besides the cost that were highlighted by Life Health Pro include an employer focus on health insurance to fulfill requirements of the Affordable Care Act (ObamaCare) and low interest rates that make it difficult to fund the cost of disability benefits that are cutting into insurer profits. Even employers who may have been considering buying disability coverage are likely to put off this decision as they make changes to comply with ObamaCare, while a change in interest rates has made it around five percent more costly for insurers to fund disability claims.

While these problems are real, workers still need to understand that there is a very real risk of becoming disabled over the course of a lifetime. Without a private policy, SSD may be the only solution and it may provide you with a minimal standard of living should you become disabled and unable to work.

If you are considering filing for SSDI in Boston, call for a free and confidential appointment at (617) 777-7777.

More Blog Entries:
Disability Risk Increases With Age, Boston Social Security Disability Lawyer Blog, July 20, 2013