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Study Finds Worker Coverage Lacking

April 23, 2001

WASHINGTON (AP) _ Forty percent of workers have no long-term disability coverage, and 41 percent of those who do consider their coverage inadequate, a survey shows.

The Consumer Federation of America and the American Council of Life Insurers, which released the survey Monday, say they hope to persuade employers to offer the coverage and workers to take advantage of it.

``The survey results illustrate how widespread misunderstanding about disability is,″ said Carroll A. Campbell Jr., president and chief executive officer of the insurers’ group. ``Disabilities can strike anyone regardless of age, gender or income level _ endangering our ability to put food on the table, cover our mortgage or rent, and meet other financial obligations. Simply put, if you are the family money machine, how will your family function if you break down?″

Forty percent of the 500 workers surveyed had no long-term disability coverage and 73 percent of 500 workers surveyed said they would be adversely affected financially if they were unable to work for a year or longer.

The survey also found that workers do not understand their disability income benefits nearly as well as they understand their work-related health insurance, life insurance and retirement and pension benefits.

Among those with disability coverage (300 of the 500 people surveyed), 43 percent said they did not know their basic long-term disability insurance benefit, while 41 percent said they believed their disability coverage would not be adequate to protect their income.

Workers typically don’t consider their disability benefits as closely as other employment benefits because ``there tends to be a feeling of ’That won’t happen to me,‴ said Kathleen Havey, director of pension policy at the U.S. Chamber of Commerce.

Long-term disability income insurance, which usually pays a percentage of the employee’s annual income, is designed to help workers and their families pay living expenses while a wage earner is unable to work. In individual policies in which insurance premiums are paid by the policyholders, disability benefits are usually tax-free. In group policies in which premiums are paid by employers, benefits usually are subject to income taxes.

Social Security also provides benefits to many disabled workers. The benefits are based on a worker’s salary and the number of years he or she worked and contributed to Social Security, but they replace only a portion of the salary.

For an employee to be eligible, these conditions must be met: The employee is disabled for five full months, the disability is expected to last as least 12 months or end in death, and the employee is deemed unable to be gainfully employed at any occupation.

Some 7.4 million disabled workers and their families accounted for about 17 percent of all Social Security beneficiaries in 1999, according to the General Accounting Office, Congress’ investigative arm.

The survey released Monday was conducted in March 2000. The 500 people surveyed came from different age groups, occupations and income levels. None of them was self-employed. The margin of error was 4.5 percentage points.


On the Net:

Consumer Federation of America: http://www.consumerfed.org

American Council of Life Insurers: http://www.acli.com

Consumers also can get a free copy by calling 1-800-589-ACLI (2254) and asking for publication number 7200004.

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