U.S. Workers Short on Long-Term Disability Coverage

By Mary Franklin

May. 15, 2012

Uninsured medical expenses are a major factor in about half of all personal bankruptcies and home foreclosures in the United States. Yet American workers are increasingly unprotected from the risk of long-term disability as employers scale back workplace benefits, according to a new survey conducted for Sun Life Financial.

Long-term disability insurance replaces a predetermined portion of an employee’s income if a qualifying disability, injury or illness lasts at least three to six months—depending on the policy.

But a growing number of employers no longer pay for basic long-term disability insurance. Instead, many employers offer employees the option to purchase group coverage themselves. Based on a survey of more than 2,000 workers nationwide conducted by Kelton Research for Sun Life, which sells disability insurance, more than 60 percent of workers offered such voluntary group insurance decline to purchase coverage.

Similarly, more than half of workers who are offered the option to supplement their employer-paid group coverage at their own expense decline to do so, according to the survey.

“Because employers are footing less and less of the overall group insurance bill, workers in our country must take proactive steps to mitigate the financial risk of long-term disability,” said Michael E. Shunney, senior vice president and general manager of Sun Life Financial’s U.S. employee benefits division. “By encouraging workers to learn how to protect themselves and their families against income loss from long-term disability, we hope this survey helps the American workforce plan for more than a lifetime of financial security.”

Though workers pay the full cost, voluntary group insurance allows them to pay lower group insurance rates and obtain coverage without extensive medical underwriting.

What’s more, the benefits are tax-free for a qualifying long-term disability plan, assuming that premiums were paid with after-tax dollars. By contrast, employer-paid long-term disability benefits are subject to income taxes.

Mary Beth Franklin writes for InvestmentNews, a sister publication of Workforce Management. To comment, email

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