Many employees lack an income replacement plan should they be unable to work for a prolonged period of time — creating a real opportunity for advisers in the employee benefits space. In 2014, fewer than 40% of employees in the private sector had short-term disability coverage, and just 33% had long-term disability insurance, according to the Bureau of Labor Statistics.
The number of employees with gap coverage is staggeringly lower. Fewer than one in 10 bought additional disability coverage or supplemental products, such as critical illness, according to new research from Cigna, which surveyed nearly 1,400 part-time and full-time employees ages 18 and older.
“The study is a good illustration of something that has been a concern for a long time — employees do not have good financial plans in place to account for the possibility of a disabling illness or injury occurring,” says Dr. Robert Anfield, Cigna’s chief medical director, disability insurance.
In fact, 46% of adults can’t cover an emergency expense of $400, according to new research released by the Federal Reserve last week.
Employees also lack an understanding about what type of coverage is best suited to help them should they become unable to work, Cigna found. When asked what coverage they would want should they suffer a disabling illness or injury, nearly half of respondents, 47%, said disability insurance. Whereas almost four in 10 said they would use sick days or Family and Medical Leave, which provides job protection but does not provide financial assistance. “They don’t know what it is, they don’t understand it,” Anfield says.
That’s where advisers can step in to discuss not only STD and LTD, but also supplemental products. “There’s a big gap there, and a lot of opportunity to help the consumer understand the value about these products,” Anfield says. “To help the individual really plan for the potential loss of income.”
Education is critical
Employees are nearly twice as likely to select additional financial protection benefits if offered through their employer, the study found. “Employers are in a very good position to provide the education to their employees about the value of protecting loss of income as part of a financial plan,” Anfield says.
However, getting through to clients can be challenging. “From the public consumer perspective, it’s complacency, it’s lack of awareness and also an indestructible attitude,” says Keith Hoffman, vice president, disability at NFP.
It’s also difficult to convince producers to sell disability products, he says, as they are knee deep in a host of regulatory issues, many stemming from the Affordable Care Act. “There’s a lot more compliance issues that they have to deal with these days than trying to sell more business,” Hoffman says.
Still, there are plenty of opportunities to add that extra revenue source. Millennials are one of the best generations to target, as many are reaching age 30 — a great time to buy disability coverage, Hoffman says.
At the other end of the spectrum, baby boomers also provide a rich opportunity. Ten thousand Americans turn age 65 each day, according to Pew Research Center. The youngest boomers are in their early 50s, another time that many people think about income protection, Hoffman says. “There’s tons of opportunity,” he says.
And it all starts with education. “We buy better when we’re familiar with what we’re buying,” Hoffman says.
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