Thought Leadership in Action

If your organization offers disability insurance, what do your employees actually know about these benefits? The answer could be “far less than you think.”

Two recent studies indicate that many human resource (HR) departments need to do a better job explaining disability insurance. While thorough information about health insurance and retirement plans is typically provided to employees, it appears that getting the facts about disability benefits to workers may receive less attention.

According to a study from the Council for Disability Awareness (CDA), HR professionals generally do have a good understanding of the causes of disability. That indicates they should be able to provide clear and useful information about disability insurance to their employees – however, they aren’t necessarily doing this. For example, a survey conducted by the Consumer Federation of America (CFA) and Unum (a leading provider of disability benefits) last spring found that 88% of people who had received disability benefits felt their employers did not communicate important disability benefits clearly.

The “Disability Divide” Between Employers and Employees

The CDA interviewed 553 HR professionals for the organization’sDisability Divide: Employer Study. The goal? To quantify differences in perceptions between workers and their employees about the likelihood and economic impact of disabilities.

"The Disability Divide study identified distinct differences between employer and employee perceptions about disability," Barry Lundquist, president of the CDA, said in a media statement. “Bridging this gap calls for education and advice about the risk of disability, the consequences of income loss and the importance of income protection planning."

Of the HR pros surveyed for the CDA study, 84% said the ability to earn an income was their employees' most valuable financial resource – even more valuable than retirement savings, having medical insurance or owning homes. Over half (53%) believed their employees "had never really thought about preparing for disability," and only 26% stated their employees are"prepared to withstand a disability that causes them to lose their income."

Approximately 48% of employees interviewed said they hadn’t received adequate information about purchasing disability insurance. In addition, although the Social Security Administration estimates that more than 25% of today’s 20-year-olds will become disabled before age 67, both the employees and the HR professionals surveyed by the CDA significantly underestimated the odds of a disability occurring.

Other Significant Findings From the CDA Data:

• A majority of HR professionals (72%) agreed that it was their responsibility to help employees understand their disability benefits. Despite this, only 57% said they should provide direction or recommendations on choosing benefits.

• Over half of the HR leaders queried (60%) thought their typical employees were equipped to survive financially for only three months or less without a paycheck.

• The majority (84%) of HR pros believed that most disabled workers would be able return to work within six months. On the other hand, nearly 70% of employees said a disability would probably make a person unable to work for a year or longer; 31% of employees polled thought a disabled employee would never return to work.

"The survey shows that employees need information and guidance about disability, and they are looking to HR professionals for help," Lundquist pointed out. "These insights provide HR professionals with an opportunity to help employees protect their financial security by offering education about their risks and guidance with their benefit choices."

Disability Benefits From the Employee’s Viewpoint

For the CFA-Unum report, researchers conducted telephone interviews with over 400 workers who had submitted disability claims in 2009 or later and had received benefits for at least six months. Titled Employer-Sponsored Disability Insurance: The Beneficiary’s Perspective, the survey assessed the impact of employer-sponsored disability insurance on workers.

The vast majority of respondents (93%) expressed gratitude that they had been covered by employer-sponsored disability insurance and 58% noted that their disability benefits had caused them to feel more positive toward their employers. In fact, almost all (95%) said that because of their direct experience with disability benefits, they would encourage other people to opt for disability insurance through their place of employment.

However, the CFA-Unum report also revealed a need for HR departments to make sure employees understand their disability benefits. The reason? A significant number of workers had not received – or had not understood – important information about their disability benefits before they stopped working due to an accident or illness.

A case in point: Almost one fourth of beneficiaries didn’t realize they had coverage before they developed a disability. Of those who knew about their disability benefits, 33% were “somewhat” aware of how long they would have to wait before payments for their disability claim began and 37% knew “little or not at all” about when their payments would begin. What’s more, over 40% had no or little knowledge about the maximum length of time disability payments would continue.