Personal Finance Essentials

The Harsh Reality of Disability

Disability Income Insurance > The Harsh Reality of Disability

Most people believe a serious disability is something that happens to someone else. That assumption is dangerous – and the statistics say it’s wrong.

According to the Council for Disability Awareness, 70% of American workers in the private sector either don’t have long-term disability coverage or believe that what they have is inadequate. Meanwhile, virtually every homeowner in the country has fire insurance – even though the odds of a house burning down are only one in 1,200. By contrast, your odds of suffering a disability before age 65 that lasts 90 days or more are an incredible one in eight. The numbers simply don’t add up.

Consider these statistics:

Seven out of ten people between the ages of 35 and 65 will become disabled for three months or longer, according to a report from the Senate Finance Committee.
One out of seven employees will be disabled for five years or more before retirement, according to the Health Insurance Association of America.
For a 32-year-old, a serious disability lasting 90 days or longer is 6.5 times more likely than death, according to the Disability Insurance Resource Center.
Two out of three DI claims are filed by people in their 40s or 50s, according to the Council for Disability Awareness.
A 45-year-old man is statistically 32% more likely to suffer a long-term disability lasting longer than 90 days before age 65 than to die. For women, that figure is 111%.

Only ten percent of all disability claims filed are due to injuries and accidents. The rest result from illness. That’s a sobering fact for anyone who thinks they’re protected simply because they have a safe job.

The Air Bag Phenomenon

There’s an ironic reason why disability has become so common: modern medicine has gotten very good at keeping people alive. Since 1960, the frequency of death from the four leading causes – hypertension, heart disease, cerebrovascular illness and diabetes – has decreased 32%, while the frequency of disability from these same conditions has increased 55%.

This is what might be called the Air Bag Phenomenon. Air bags save lives in collisions, but accident survivors often emerge with serious injuries – burns, broken bones, hearing and vision loss. The same dynamic plays out in medicine broadly. A worker who suffered a heart attack on the factory floor a generation ago might have died. Today, emergency responders arrive within minutes, stabilize the patient and transport them to a hospital equipped with the latest technology. The result? The person survives – but may never be able to return to work.

Modern medicine can prolong your life and improve its quality. What it cannot do is guarantee that you’ll never miss a day of work. A study of more than 2,000 severely ill patients reported in the Journal of the American Medical Association found that nearly a third of families lost most of their life savings as a result of the patient’s illness. Ninety-six percent of those patients had some form of medical insurance – yet 31% still lost their savings. The costs that medical insurance doesn’t cover – home care, health aides, special transportation and lost income – can be just as devastating as the hospital bill itself.

And remember: your bills don’t stop just because your paycheck does. If you slip on the ice and break your leg, your mortgage payment is still due.

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