Disability Education
Overview
Who is at Risk for Disability? As a society of consumers who subscribe to the ideal of "it won't happen to me," people often put themselves at high risk, either physically or financially, because they fail to understand the potential of a disabling event. In fact, there is a common misconception that the likelihood of such an event is quite low and therefore any provision of disability insurance is considered adequate, if needed at all. Unfortunately for those who buy into this train of thought, the reality is quite different from the perception. In reality, a forty-year old person actually has a 43% chance of experiencing a disabling event before retirement.
Shortfalls of Sole Reliance on Group Disability Although an executive may receive group disability coverage through their company sponsored plan, the typical 60% income replacement is often taxable to the individual or does not cover valuable bonus compensation. This creates a significant gap between the individual's total annual salary and the amount they would receive in disability payments. (See Graphic).Employer-Paid Long Term Disability Benefit Chart" Any executive with significant financial responsibility should face the reality that their current disability protection will likely fall very short of all obligations, putting their assets and lifestyle at risk.
- A 40-year old individual has a 43% chance of suffering a disabling event before retirement.
- Seven out of 10 people between the ages of 35 and 65 will experience a disabling event that will have an impact of 3 or more months.
- As medical technology improves, your chances of surviving an illness or an accident increases; suffering a disability is more likely than being in an auto accident, dying or having a fire in your home.
- 48% of mortgage foreclosures are the result of a disability, compared to only 3% that are caused by death.
- 50% of consumers have three months or less of their living expenses saved.
- 33% of Americans have no retirement savings and are not eligible for a pension.
The Savings Plan Myth Many executives are under the assumption that if a disability were to occur, they would be sufficiently covered by the funds in their saving account. A 2007 Guardian Insurance & Behavior Study suggested that 50% of American consumers have three months or less of their living expenses saved. In fact, The U.S Department of Commerce revealed in 2005 that for the first time since the Great Depression, Americans spent more than they earned, and as a result savings accounts are shrinking, if they even exist at all. Considering the fact that the average disability lasts two years, an unprepared executive with limited savings and insufficient company sponsored disability coverage could face the possibility of insolvency if a disability were to occur.