Kryptonite: The Case for Disability Insurance

Even Superman had his Kryptonite. Still many of us, particularly in our younger years, feel invincible. Become disabled? Not me. Yet here are the facts[1]:

  • More than 37 million Americans are classified as disabled
  • Over one in four of today’s 20 year-olds will become disabled before they retire

Despite these figures, less than half of workers have discussed disability planning and less than a third of the private sector workforce has long-term disability insurance. For most workers, financial planning, when it does occur, focuses on savings goals. It fails to contemplate the things that can derail financial security, such as death (I’ll cover the need for life insurance in a future post) or disability.

You can’t earn a living

Today, about 100 million American workers are without private disability income insurance. I believe the underlying issue is a lack of understanding and awareness. Most workers fail to recognize that the risk of becoming disabled is real and that it generally means losing your ability to earn a living.

A couple sobering statistics: nearly two-thirds of Americans said they couldn’t cover basic living expenses for a year if their employment income was lost; yet the average group long-term disability claim lasts nearly three times that long (34.6 months).

The Council for Disability Awareness (CDA) asks a highly relevant question, “Can your family live on $1,130 a month?” Because that’s the average monthly benefit paid by Social Security Disability Insurance.[2] If that doesn’t seem like much it isn’t – for a family of four, $1,130 a month is 43 percent below the 2014 Federal Poverty Guidelines.[3]

Raising Awareness

May is Disability Insurance Awareness Month and no better time to stress – to individuals, employers and financial professionals – just how important it is for workers to have disability income insurance.

It’s also a good time to stress the importance of healthy lifestyles. Ninety percent of disabilities are caused by illnesses not accidents. Based on the CDA’s disability risk calculator:

  • A typical male, age 35, 170 pounds, non-smoker who leads a healthy lifestyle has a 21 percent chance of becoming disabled for 3 months or longer.
  • If the same person used tobacco and weighed 210 pounds, that risk would more than double to 45 percent.

While it’s possible to reduce the risk of disability, clearly we can’t eliminate it. That’s where disability insurance comes in. Because like Superman, as much as we hate to admit it, we all have our vulnerabilities.

[1] All data in this post is sourced from, unless otherwise footnoted.

[2] At the end of 2012.