The importance of owning life insurance is almost a given in American households — especially households with young children. After all, most people easily comprehend the protection life insurance offers: If the worst happens, life insurance will help ensure their loved ones have a roof over their heads, food on the table and, perhaps, college tuition in the bank.
But disability insurance is another thing entirely. Americans still haven’t grasped the need for a policy that will help pay the bills when they are injured or too sick to work. Perhaps it’s because we all understand death — let’s face it, it’s a sure bet for all of us, sooner or later. Disability, on the other hand, is something we tell ourselves happens only to others.
There’s optimism, then there’s denial
Research by the National Association of Insurance Commissioners, or NAIC, confirms that mind-set. In a 2007 NAIC study conducted by International Communications Research, just 13 percent of consumers surveyed said it was somewhat or very likely they would become disabled or unable to work. The truth, however, is less cheerful: In the year 2000, fully 20 percent of Americans — a whopping one-fifth of the population — had some type of long-lasting condition or disability, according to the U.S. Census Bureau.
While there is no doubt that death carries a greater long-term emotional impact than disability, the financial ramifications of disability are often more severe — and that’s something every insurer must learn to convey.
Americans are markedly upbeat: After all, our nation was built on hope and we, as individuals, like to believe sunny skies are just ahead. In addition to viewing disability as something that happens to “the other guy,” many two-income couples imagine they’ll miraculously scrape by on one income until the disabled partner returns to work.
They need to understand that’s often impossible, for several reasons:
- The more we earn, the more we spend. That means many two-income families simply don’t have the funds to cover even the basics — the mortgage, car payments, credit-card bills, food and utilities — when one paycheck vanishes.
- With injuries and illness come expenses, and some of those expenses aren’t covered by insurance, placing additional stress on an already-stretched budget.
- In some cases, a healthy spouse might be forced to take unpaid leave — or even quit working altogether — to provide care and support at home. That means a two-income family could quickly become a no-income family.
Sometimes the logical is illogical
The truth is, we as insurers have understood for years the importance of disability insurance to family security, but it’s been a difficult concept to convey. And when people are strapped for cash — a condition that’s epidemic in our nation today — it’s even more tempting for consumers to forego coverage.
We have a responsibility to show our customers that now, more than ever, they need the protection offered by disability insurance. Sure, it’s easy to be sympathetic, to nod in understanding when a customer says, “I just can’t afford it in today’s economy.” But we owe that customer — and that customer’s family — more than an understanding nod. It’s up to us to make sure that six months from now, if that customer is sick or injured and out of work, he or she doesn’t look back and say, “I wish my insurance agent had pushed me a bit harder because I really needed that policy.”
A threat for today and tomorrow
The truth is, if people understood exactly what disability insurance is — what it covers and how it protects, the product would sell itself.
Americans need to know that in addition to providing immediate financial resources, disability insurance is important to assuring their future and their retirement dreams:
- Loss of income makes it impossible to build retirement savings.
- Without income, they may be forced to withdraw from retirement accounts to pay for current expenses.
- Either way, their retirement will be less than they imagined it would be.
Survey shows ... Americans are ready
A 2009 Aflac-commissioned survey conducted by Accelerant Research shows why now is the right time for insurers to hammer home our message about the importance of disability insurance — why American families finally might be ready to hear what we’ve been saying for so long.
More than 1,200 online interviews were conducted to gauge how consumers’ attitudes and behaviors related to health and wellness have changed over the past year. We wanted to know things like whether they’re skipping doctors’ visits to save money, how worried they are about the economy and their jobs, and whether an illness today would be more financially troubling than it would have been a year ago.
The answers were enlightening.
For example:
- Current economic conditions have changed the way consumers feel about their security and their ability to survive financially in the event of illness, medical emergency or job loss.
- Concerns about the economy and their ability to survive financially in the event of injury or illness are magnified among families with children, consumers whose monthly incomes have declined in the past year and households with annual incomes of less than $50,000.
- Consumers without supplemental or voluntary health insurance coverage are more concerned about their finances, job security and insurance than those with coverage. These consumers are among those who are taking drastic steps to save money — such as skipping doctor visits and medical procedures.
A suddenly attentive audience
The bottom line is that the declining economy is opening eyes to the value of disability insurance; Americans are recognizing the financial vulnerability that comes from being under-protected and under-insured. Every day, broadcast and print media outlets trumpet news about layoffs, stock market declines, tightened credit, reduced home values and foreclosures.
Perhaps for the first time, large segments of our population are primed to hear the message: Disability insurance is not just an important component of every financial portfolio — it’s an essential component.
Benjamin Franklin once said, “It’s better to be penny-wise than pound-foolish.” In today’s economy, Americans can’t afford to save a few dollars by scrimping on insurance — not when you consider that unexpected illnesses and injuries cause 350,000 bankruptcies each year. (“Illness and Injury as Contributors to Bankruptcy,” Health Affairs, Feb. 2, 2005) Going without disability insurance is a prime example of how saving a few dollars in the short term can cost thousands in the long run.
Taking responsibility for our clients
As responsible insurance professionals, it’s up to us to show our customers the true value of disability insurance — for themselves and for their loved ones. When you meet with clients, whether they are corporate representatives or individuals, don’t let the economy, even subconsciously, weaken your resolve. When a customer says they or their employees cannot afford coverage, remind them that now, more than ever, they can’t afford to be without it. After all:
- The two biggest threats to financial security are death and disability — and in the last 10 minutes, 498 Americans became disabled. (National Safety Council, Injury Facts, 2008 Ed.)
- A disability — even one that lasts for only a few months — can have a devastating long-term effect on a family’s finances. There will still be mortgage or rent to pay, food to be purchased, car payments to be made. And with banks and creditors more nervous than ever about bad loans and payment defaults, even a couple of late payments can ruin a credit score it’s taken years to build.
- Business owners have extra incentive to seek the protection afforded by disability insurance. Not only are their loved ones depending on them, so are employees who are counting on the continuation of their businesses.
The bottom line? Your customers are looking to you for guidance. Don’t let them down. Be there — now, when you’re needed most — to help them achieve long-term protection.
Karen Riedel is second vice president, director of Product Marketing, for Aflac’s U.S. operations. She oversees all marketing strategies, plans and execution to include product development, product positioning, and advertising briefing. She has held several management positions during her 20-year career at Aflac, ranging from product manager to director of Product Development and Communications.