No Safety Net: Only a third of consumers have disability insurance

Unum Senior Vice President Greg Breter

Unum U.S. Senior Vice President Greg Breter recently received a customer comment describing the client's experience with with the disability insurance coverage provided by the Chattanooga business.

"It said, 'I'll always be indebted to Unum. You saved me financially, helped save my marriage and made living with a terminal disease bearable."'

Breter says that when it comes to disability claims, that's when the rubber hits the road.

"We're sensitive to the fact that we're touching and interacting with people through some of the most difficult times of their lives," he says. "We don't want people to feel like they're just a number in our system."

Unum is the nation's biggest provider of disability insurance. But only a third of American workers are enrolled in coverage by Unum or another company, leaving about 75 million workers without the income protection if they're sick or injured.

According to the insurance and retirement research firm LIMRA, just 47 percent of employers with 10 to 99 workers offered long-term disability insurance in 2014.

When asked why, about two-thirds indicated the cost was too high. About 57 percent of the firms said that not enough workers would enroll, and many said they didn't think their employees would value or appreciate the benefit.

A study released earlier this year by the Consumer Federation of America and Unum also showed that while about six in 10 employers with long-term disability insurance cite the cost to the employer as a major reason for not offering it, about two-thirds indicated they're not knowledgeable about monthly premiums for the coverage.

The CFA research indicates that industry data shows the typical range for long-term disability insurance premium per month in employer-sponsored programs is $20 to $30.

Stephen Brobeck, the Consumer Federation of America's executive director, says that group disability insurance serves the interests of small employers and their workers.

"By making this insurance available, employers help protect the personal income needed by consumers," he says.

Breter says that research shows that one in four 20-year-olds will become disabled before they reach age 67.

"We need to do a better job to inform and educate about the potential of disability and the lack of financial protection workers have," he says.

Breter says that for someone making $50,000 a year, income protection provided through Unum offers a $30,000 a year benefit for a policy costing less than $15 per pay check.

The CFA survey shows that 94 percent of employers disagree that most employees have enough savings to cover normal living expenses if they become unable to work due to illness or injury. Only 13 percent of employers think that Social Security and workers compensation will cover most of an employee's income if they become injured or ill.

Breter said that government programs such as Social Security, workers compensation and other state safety nets offer insufficient coverage to workers. Policies offered by insurers help fill the financial gaps, he says.

Social Security benefits can be modest, he says, such as $1,100 to $1,200 a month. Also, applicants often have to wait up to 18 months to get approved and benefits to start, Breter says.

"That's a long time for an individual to wait," he says.

Breter adds that the Social Security disability trust fund is slated to be exhausted next year. While he doesn't believe the federal government will let that happen, that's the shaky ground on which the program is based, he says.

Also, the Affordable Care Act doesn't include any provisions for income replacement, the Unum vice president says.

"Employees who experience a critical illness still face substantial health care costs," he says.

In addition, health care reform is shifting more decisions about benefits to consumers.

"It's important for us to step in to educate and inform about our products. But, it's making sure we're educating and informing in terms that are simple and clear," Breter says.

The group disability sector represents about 28 percent of annual premium income for Unum, which employs nearly 3,000 people in Chattanooga.