Long-term disability insurance often gets overlooked by American workers. Some do not think they need it because they remain healthy and expect to stay that way for the rest of their lives. No serious injury or chronic medical condition will ever happen to them. Besides, who wants the added expense?
But according to the Council for Disability Awareness, more than 25% of 20-year-old people become disabled before their planned retirement. Many of those who decline long-term disability insurance choose not to look well into the future. After all, they figure that their chances of getting a herniated disc, cancer, heart failure, mental illness or serious bone fracture remain slim.
Average policy duration less than three years
Long-term disability typically pays 40% to 60% of a person’s income. While some policies pay people until they reach the age of 65, the average duration for a claim is 34.6 months – just short of three years, according to the Council for Disability Awareness.
If you do not have long-term disability insurance, please answer this question: Do you have three years of emergency savings to cover your expenses while you recover? The answer is not likely as many Americans struggle to even set aside three months of expenses for emergencies.
According to a Federal Reserve Board survey released in 2016, nearly half of U.S. adults are not prepared for financial challenges and struggle to pay for emergency expenses. The survey noted that 46% of the adult respondents said they would be unable to pay for a $400 emergency expense.
The most common reasons for seeking benefits
These are situations that exemplify the importance of long-term disability insurance. Unexpected health problems happen. According to the Integrated Benefits Institute, the most common reasons employees seek long-term disability claims are:
- Musculoskeletal disorders, including arthritis, back and joint pain 29%
- Cancer 15%
- Pregnancy 9.4%
- Mental illness, including depression, anxiety, schizophrenia, obsessive-compulsive disorder and autism 9.1%
- Bodily injuries such as fractures, sprains along with muscle and ligament strains 9%
There is value in long-term disability insurance. You may never know when you will be struck be a debilitating injury or that a chronic condition affects your ability to work. It is crucial to be prepared.