PHILADELPHIA, May 07, 2009 - Economic downturns are a time when people really want to get their arms around their financial health, security and future. But how well do people understand their financial risks and insurance coverage?
When it comes to disability insurance plans: not so well, according to a recent national survey for CIGNA. For example, while nearly all Americans say they find value in disability insurance, many either don’t know or overestimate the cost of a basic long-term disability policy offered through the workplace. But the good news for employers is they play a valued role as a resource that can help employees strengthen their financial health.
The survey, conducted by Yankelovich1 for CIGNA (NYSE:CI) as part of CIGNA's “Health and Well-being in America” series of surveys, explored employees’ attitudes and knowledge of disability insurance and the approaches they take in choosing coverage.
Cost Unconscious
While disability coverage ranked among the insurance benefits employees value most, the majority of employees would fail the “price is right” test. In fact, 42 percent of survey respondents say disability insurance is one of the most important types of coverage to have, but nearly 40 percent overestimate the cost of a basic long-term disability policy available through work. Estimates were more than double to quadruple the amount of the actual average cost for a plan that would pay them 50 percent of their income if they had to use it.
Only about three in 10 were able to correctly identify the average cost range (about $20 - $25 per month) for this type of coverage, which is often less expensive than getting similar private disability insurance outside the workplace (a range of about $52 - $160 per month)2.
“The survey uncovered a real opportunity for employers to help their employees. Disability insurance is clearly a benefit that employees value – and one that could be financially out of reach if they had to purchase it on their own,” said Craig Guiffre, a senior vice president for CIGNA Group Insurance.
“For those employers who don’t offer disability coverage, expanding their benefits to include it – whether it’s paying the entire cost, a portion of the cost, or just offering group coverage for employees to purchase on their own – is a viable way to help employees strengthen their financial security,” Guiffre said.
Detail Disoriented
Disability takes a big toll and presents substantial financial risks in America. According to the National Safety Council, a disabling injury occurs every second and a fatal injury occurs every four minutes.3 Three out of 10 workers entering the work force today will become disabled before retiring,4 and an illness or accident will keep one in five workers out of work for at least a year before the age of 65.5
While nearly all survey respondents said they would value having disability insurance that pays part of their pay check if they were to become sick or injured, a fair portion aren’t paying close attention to what they’re purchasing and are likely misinformed about whether they have or need coverage.
While about half say they buy as much insurance as they can possibly afford, another 37 percent say they only buy the minimum (19%) or don’t really pay attention and just keep the same level of coverage they had last year (18%).
About two thirds (64%) of respondents said they had disability insurance coverage, and 48 percent said they have it through an employer. Other data indicate that only about 31 percent of employees in private industry have access to long-term disability insurance through their employer6, which means some employees might think they have coverage, but don’t. The survey also showed that single people were much more likely than other groups to report not having any disability coverage, with 45 percent saying they don’t have it.
“When you support others with your income, the financial risk of being out of work can be more apparent, but single people are also at risk,” Guiffre said. “When you’re single, you might not have other resources to fall back on, such as a spouse’s or partner’s income, so you could be more financially vulnerable if an injury or illness suddenly sidelines your career.”
Ready to Refocus
Guiffre said the survey points to a renewed opportunity for employers and carriers to help people better understand how different types of insurance work as part of a financial plan. It’s also an opportunity for employers to revisit the types of insurance offerings they provide.
When asked to whom they turn to for advice on disability insurance, those surveyed said they most likely turn to their employer. More people identified their employer as a source of advice (43%) than a financial professional (36%), their spouse (33%), or the Internet (19%). What’s more, survey respondents agreed that they:
- appreciate the convenience of getting these benefits through an employer;
- believe getting insurance through an employer is cost effective;
- believe that employers have done plenty of research to ensure they have access to quality benefits at an affordable cost;
- have several options through an employer and can choose which best suits their individual needs.
“May is Disability Insurance Awareness Month, and a great time for employees to verify that they have disability insurance, and if so, how much,” said Guiffre. “Some employers provide and pay for a base level disability policy, and then allow employees to buy additional coverage at their own expense. Others offer employees an option to purchase their own coverage, but at favorable group rates. So, employees should check if they have the level of disability coverage that’s right for them.”
CIGNA is joining the Life and Health Insurance Foundation for Education (LIFE) in observing National Disability Insurance Awareness Month during May. To assist individuals, CIGNA has created an online consumer education tool kit to help people ask the right questions about disability insurance.
More information is also available at the LIFE Web site at www.lifehappens.org.
Additional disability insurance awareness resources from CIGNA:
Read CIGNA's white paper
Listen to CIGNA's podcast
About the Survey
The survey on disability insurance, conducted by Yankelovich, a part of The Futures Company, consisted of telephone interviews with 742 full-time employed Americans 18 years of age or older. These interviews took place Jan. 29 – Feb. 2, 2009. Data are weighted by age, gender, geographic region and race to ensure reliable and accurate representation of the population. The sampling error for this study is +/- 3.6 percent.
About CIGNA
CIGNA (NYSE:CI), a global health service company, is dedicated to helping people improve their health, well-being and security. CIGNA Corporation's operating subsidiaries provide an integrated suite of medical, dental, behavioral health, pharmacy and vision care benefits, as well as group life, accident and disability insurance, to more than 46 million people throughout the United States and around the world. To learn more about CIGNA, visit www.cigna.com. To sign up for email alerts or an RSS feed of company news log on to http://newsroom.cigna.com/section_display.cfm?section_id=18.
1 “Understanding Views of Disability Insurance Plans,” prepared for CIGNA by Yankelovich, a part of The Futures Company, February 2009.
2 LIMRA International, a Windsor, Conn.-based research and consulting organization for the insurance industry, 2008, Fourth Quarter.
3 National Safety Council, Injury Facts, 2008 edition.
4 Social Security Administration, Fact Sheet, January 31, 2007.
5 Life and Health Insurance Foundation for Education, November 2005.
6 U.S. Department of Labor, Bureau of Labor Statistics, 2007.
